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Food, energy prices climb in May

Published:Tuesday | May 26, 2015 | 9:13 AMCamilo Thame

Yellow yam might be more affordable now than it was a month ago, depending on where it is bought, but overall prices on vegetables and starchy foods leaving through the farm gate jumped this month, according to data published by the Jamaica Agricultural Marketing Information System.

Carrots, like cabbage, carried prices in May that were more than double what they were a month before, while callaloo, on average, was 25 per cent more expensive to buy from farmers. Irish potato, coco and dasheen prices were up by 20-40 per cent.

The upward movement in farm prices - which were seasonally uncharacteristic and likely reflected drought conditions - is indicative of an upward trend in food prices that largely contributed to the 0.2 per cent inflation rate recorded for April.

Food and non-alcoholic beverages make up almost 38 per cent of the basket of goods that the Statistical Institute of Jamaica (Statin) tracks on a monthly basis to determine where consumer prices are trending. The food index climbed by 0.5 per cent in April.

Declines in food prices in each of the previous three months led to deflation, and contained inflation at the lowest level it has been in decades. Even with the reported rise in the consumer price index in April, Statin reported deflation of 0.5 per cent for the first four months of 2015.

Lower energy prices helped. Last month, electricity rates fell by six per cent, despite the introduction of a new, higher non-fuel tariff approved by the Office of Utilities Regulation. A 20 per cent reduction in the fuel component of electricity bills in April offset those rate adjustments.

On the other hand, gasolene prices went up by six per cent at the refinery last month. The increase in the special consumption tax on petrol by $7 a litre and the replacement of a 1.0% petroleum cess with a $2-per-litre tax already impacted prices in March. So the increases at Petrojam (and eventually the pumps) in April was due to rising US Gulf Coast reference prices, which the state-run refinery uses to price its product.

For May, up to the third week, petrol prices inched up slightly, by 0.4 per cent. However, electricity rates were adjusted upwards by three per cent this month.

Given that the index for 'housing, water, electricity, gas and other fuels' carries a 12.8 per cent weighting in the consumer price index, rising food and energy prices point to higher inflation in May.

Looking forward, businesses were more optimistic about inflation 12 months ahead in April than they were in February, according to the latest inflation expectations survey published by the Bank of Jamaica. Respondents to the survey expected 12-month inflation to fall to 5.1 per cent by April 2016. In February, they projected that point-to-point inflation would reach 7.7 per cent in a year's time.