The December Retail Prices Index figure was up 0.2% from September, mainly because housing costs went up with the rise in bank interest rates.
The RPI(x) figure – which excludes housing costs – was also 4%, which represented a 0.4% fall – an encouraging sign for what is regarded as the underlying inflation rate.Other factors driving up the main RPI figure were:Higher prices for coal and oil; a rise in the price of bread and increased motoring costs (mainly insurance), new car prices and spares.However, air fares and travel costs have fallen 10% since September, when the Statistics Unit controversially claimed that they had risen significantly.
The unit still maintains that year-on-year, they have risen 10%.The unit has been criticised for using the most expensive fares for its calculations, rather than internet fares booked months in advance where the cheapest fares can be found.
More of those types of fare have been included in this quarter and more weight has been given to fares available on-line.The head of the unit, John Imber, insists that the September figures were correct and that the fall this time was real and not a ‘correction’ because of the wider sample.
‘It is in no sense a correction.
There has been a genuine reduction in air fares in the latest quarter,’ he said.Finance and Economics vice-president Senator Philip Ozouf had led the criticism.
He said today that he was satisfied that there was now a better method of collecting information on air faresThe overall rise in the RPI is still a concern for Finance, although committee president Senator Terry Le Sueur was this morning forced to admit that the States’ policy in increasing impots had contributed significantly to the figure.
Without the duty hikes in January last year, the annual figure would have been 3.5%, not 4%.
A similar effect is likely as a result of this year’s Budget.’In the short term that is true, but in the longer term, as we take money out of the economy we will see spending decrease and prices tighten.
In the longer term, the RPI should become more stable,’ Senator Le Sueur said.
