Inflation in Jamaica continues to moderate according to the latest report on the All-Jamaica Consumer Price Index released this week by the Statistical Institute of Jamaica (STATIN) showing that the point-to-point inflation rate as of February 2023 was 7.8 percent, this compares with 8.1 percent reported to January, this year.
The rate of inflation over the first two months of the year is 0.2 percent, in line with the average for the last four months and is now running at 45 percent below the average of 0.37 percent for the four months to February last year. Factors that could lower the pace, even more, are the recent revaluation of the Jamaica dollar and prices for some goods that are declining as new inventory items cost falls compared to the stock of goods in 2022 and most importantly the recent fall in the price of oil.
The CPI increased by 0.5 percent for February 2023 the release stated, up from a modest decline in January. The latest “increase was mainly influenced by a 2.7 percent increase in the index for the division Housing, Water, Electricity, Gas and Other Fuels. The increase in the index for the division Housing, Water, Electricity, Gas and Other Fuels was impacted by higher electricity rates which resulted in a 7.4 percent rise in the index for the group Electricity, Gas and Other Fuels. There was a negligible decline in the heavily weighted Food and Non-Alcoholic Beverages division as prices continued to fall for items within the class Vegetables, tubers, plantains, cooking bananas and pulses, by 2.4 percent. This was however at a slower rate when compared to the (-5.8%) that was recorded for the previous month, January 2023”.
Has Jamaican economy fully recovered?
The Jamaican economy grew 6.4 percent in the first quarter of this year over a similar period in 2020, according to the Statistical Institute of Jamaica, overall GDP was still less than for the first quarter in 2020 but not far behind and with the faster pick up in visitor arrivals in the June quarter and its linkages to the rest of the economy GDP could be back to 2019 levels.
Image courtesy of arztsamui/FreeDigitalPhotos.net
The economic rebound is happening much faster than official reports suggested. Most likely, except for mining, the overall economy could exceed that of 2019, early data from the tourism sector for the June quarter suggests. The hotel and restaurant sector that grew 107 percent in the March quarter over 2022, with the tourist arrivals at just 72 percent of 2019 outturn. Data of visitor arrivals in the June quarter show the sector looks like it may come in around 97 percent of 2019 and will help push the industry to near full recovery compared to a 78 percent the hotel and restaurant sector represents in the 2022 first quarter versus 2019. The only other sectors that are down significantly are mining at a mere 28 percent of 2019 and Other Services at 85 percent of that in 2019.
Agriculture is the best performing sector
Statin puts output for the economy in real terms at $189.9 billion at the end of March, just shy of the $191 billion for the first quarter of 2020 but 3 percent off the $195.7 billion in the 2019 first quarter. The economy would need to grow 7.3 percent in 2022 in the second quarter to equal the 2019 outturn of 197 billion.
The data for GDP going back to the early 21 century reveal that the country’s GDP growth has been anaemic as the 2019 GDP of $197 billion is just above the 2008 first quarter of $194 billion.
BOJ is wrong as inflation keeps falling
Jamaica’s central bank (BOJ) was granted independence in 2021 but they seem to be making a mess of it. For much of last year they fiddled around telling the country that inflation was well under control and that it would remain within the band of 4-6 percent for two years, that’s before they found out that it wasn’t.
They informed the Ministry of Finance in April last year, why they could not increase interest rates as that would trim economic growth. In May, they made an erroneous statement that inflation was still getting higher when the underlying data was suggesting that it was improving and close to their target.
According to BOJ inflation was 11.8 percent in April and would get worse over the next two months.
ICInsider.com advised that they were wrong and that inflation was running close to the target since October and therefore was not getting worse but was improving.
According to the BOJ after its meetings held on 12, 13 and 18 of May 2022, “the Monetary Policy Committee (MPC) noted that inflation at April 2022 of 11.8 percent was higher than the outturn at March 2022 and represented the ninth consecutive month that inflation has been above the Bank’s target range of 4.0 to 6.0 percent. While inflation is forecasted to rise further over the next two months, the Bank forecasts inflation to fall in the second half of the year, consistent with consensus forecast for a fall in commodity prices. This means that the public should start to see lower inflation rates each month, beginning in the second half of 2022, as long as tensions between Russia and Ukraine do not escalate and inflation among Jamaica’s trading partners falls.”
The latest data from Statin is once more confirming what we stated last month and casting serious doubts on the authority of the central bank. Statin’s latest reading on inflation is 0.3 percent for May with the year or year rate down to 10.8 percent, which is down 100 basis points from the April reading. The monthly rate for May is the lowest since November last year with zero inflation and April with negative 0.5.
Since October last year, some seven months ago even before the interest rate hikes took effect, inflation was just over 6.4 percent per annum. With an average of 0.535 percent per month. For the period from December last year, the average rate is 0.547 percent per month, but since January it is running at 5.46 percent per annum.
The rate is moderating, but the country is not out of the woods as yet. There are some hopeful signs for the coming months. The rate of exchange of the Jamaica dollar is now officially J$153.45 to the US dollar compared to around $156 up recently, this will cut the cost of imports and will contribute in a major way to cutting imported inflation. The recent increase in interest rates will also slow down economic activity.
The inflation trend since October last year, suggests BOJ has overdone the interest rate hike and the rate should start the downward trek before the end of the year.
Jamaica’s inflation down considerably
Oil prices came back from the pre-Ukrainian war prices easing inflation in Jamaica in April, with the country posting the lowest inflation rate since April last year. The year over year inflation rate is up to 11.8 percent according to Statin’s latest read on inflation.
Increased fuel prices added to inflation.
The release from the Statistical Institute of Jamaica would lead to a view that despite the negative 0.1 percent for April 2022, that inflation is still rising. That of course is false. Over the past seven months, inflation is trending well within the Bank of Jamaica’s range of 4 to 6 percent, at 5.10 percent annualised, with March being the worse month with a 1.6 percent increase, fueled a lot by the events associated with the Ukrainian war, but for that, the rate may well be lower than it currently sits.
The trend is in keeping with ICInsider.com report earlier this year, suggesting that inflation was well in control from the latter part of 2021.
The reduction in inflation in April according to the release by Statin, “was occasioned by electricity rates, which mainly resulted from lower fuel charges.”
The above decline was tempered by Statin states, by the 1.1 percent increase for the group ‘Water Supply and Miscellaneous Services Relating to the Dwelling due to increased water and sewage rates. Food and Non-Alcoholic Beverages’, increased by 0.5 percent, as most classes within the division recorded higher inflation rates. There were reduced prices for Vegetables, tubers, plantains, cooking bananas, pulses, Fruit and nuts.
Unemployment at record levels in Jamaica
As Jamaica’s economy continues to recover from the negative effects of Covid-19, with a sharp drop in the number of persons unemployed and the number of persons employed is 16,000 less than the previous highest previous level in January 2020, according to data released by the Statistical Institute of Jamaica (Statin)
“In January 2022, there were 1,257,100 employed persons, an increase of 57,800 or 4.8 percent over January 2021”, Statin reported. But the 2022 numbers lag that of January 2020 with 1,273 million persons employed. With a full labour force of 1.34 million only 83,000 persons were regarded as unemployed as of January, the lowest on record with an unemployment rate of 6.2 percent bettering the previous lowest rate of 7.1 percent in October last year and much better than 8.8 percent for the same quarter of 2021.
While the unemployed numbers have fallen, the number of persons in the workforce declined from 1.373 million in 2020 to 1.34 million in 2022 a drop of 39,000. The job seeking rate declined to just 3.9 percent in the latest survey down from 4.9 percent in January 2020.
The largest increase in employment by occupation group was in ‘Clerks’. There were 120,500 persons employed in the occupation group ‘Clerks’ in January 2022, increased by 22,100 or 22.5 percent compared to January 2021.
Real Estate and Other Business Services had the largest increase by industry group compared to January 2021.
The Hampshire Apartments complex a Guardian Life project.
There were 126,600 persons employed in this industry group in January 2022, an increase of 25,200 or 24.9 percent versus the 2021 quarter. The second highest increase was in ‘Accommodation and Food Service Activities’, which employed 13,900 more persons.
The number of persons classified as Outside the Labour Force was 755,600 in January 2022, a decrease of 22,400 or 2.9 percent from 778,000 in January 2021.
Of import, the data would have done at a period when the tourism sector was operating at around 30 percent capacity as well as some other businesses that were yet to recover fully from the decline since 2020, as such the next reading could result in another fall in the unemployment rate and a strong possibility that total employment could get to record levels.
Jamaica’s GDP drops 6.7 percent in Q1
GDP fell 6.7 percent in the first quarter of 2021 due to the 9.9 percent fall in category service industries, the Statistical Institute of Jamaica reported.
Mining records GDP gains in 2021
Declines recorded for service industries except for government services. GDP for Hotels and restaurants fell 56 percent, being the main contributor to the decline. The Goods Producing Industries grew by 2.6 percent, with mining and Quarrying up 7.1 percent. Construction grew 10.5 percent, but Manufacturing suffered a 1.1 percent decline. Agriculture fell 2 percent due to drought conditions, Statin stated.
Declines were experienced in Other Services 21.9 percent, Transport, Storage and Communication 7.8 percent, Electricity & Water Supply 6.9 percent, Wholesale & Retail Trade; Repairs; Installation of Machinery & Equipment 5.1 percent, Real Estate, Renting & Business Activities 1.9 percent and Finance and Insurance Services 1.2 percent.
The stars in Jamaica’s export world
Jamaica’s export earnings fell in 2020 from US$1.516 billion to US$1.165 billion, but it was not all bad news on the export front. Excluding mining that fell sharply due partially to the closure of the Alpart alumina plant and a fall in re-exports of mineral and fuels, other exports actually increased as a group but not anything like the fall in other major items.
Coffee exports have fallen but could recover
Export data released recently by the Statistical Institute of Jamaica shows the dramatic change that occurred on the export front with the traditional products giving way to new ones. Traditional Exports excluding mineral fuels earned just US$18.85 million down from US$16 million in 2019 and a fall of 44 percent from US$33 million earned in 2017, due primarily to a 43 percent fall in the export of coffee.
Export earnings from manufacturing, agriculture, and mineral fuels exceed the mining sector in 2020, accounting for 56 percent of exports compared to 51 percent in 2017 and 47 percent in 2019, but excluding mineral fuels, the rest of exported products accounted for US$430 million for 37 percent of exports earning in 2020 compared to US$382 million or 35 percent in 2017 and 27 percent with US$416 million in 2019, the decline in sugar, coffee and scrap metals were the main contributors to the slower growth. Excluding the three products along with mining and mineral fuel, exports would have risen an attractive 61 percent since 2017.
For example, sugar, bananas, cocoa are now shadows of their former glory. In their places come yams, now the leading agricultural export, followed by ackee and coffee. Sugar that was said to be king at one stage, generated just US$6.5 million in export earnings last year, bananas brought in a mere US$726,000 citrus US$383,000 and cocoa US$348,000.
Coming tomorrow – Declining sectors obscure export headway.
Jamaica’s unemployment drops again
Jamaica’s unemployment rate has dropped from 10.7 percent in October last year to 8.9 percent in January this year, which is 1.5 percentage points higher than the rate in January 2020, data from the Statistical Institute of Jamaica shows.
According to the body charged with gather and reporting on Jamaica’s economic data, there were 1,194,800 employed persons at the time of the survey, 74,300 or 5.9 percent fewer persons compared to January 2020. “The largest decline in employment by occupation was among ‘Service Workers and Shop and Market Sales Workers’, while the industry with the largest decline in employment was ‘Accommodation and Food Service Activities,” Statin said.
Jamaica’s Inflation stays low
Inflation in Jamaica for the first five months of 2020 remained extremely low, with the rate for May, coming in at 0.1 percent following April’s increase of just 0.2 percent, leading the year-to-date inflation rate at negative 0.4 percent.
Inflation over the past twelve months came out at 4.2 percent, with the period between July and November rising by exactly 4.2 percent, mostly due to a hike in the exchange rate of the Jamaican dollar versus the US dollar.
The May movement resulted mainly from a 1.1 percent increase in the heavily weighted Food and Non-Alcoholic Beverages division, according to a release from the Statistical Institute of Jamaica due to higher prices for agricultural produce, with a 2.3 percent rise. The division of Housing, Water, Electricity, Gas and Other Fuels increased 1.5 percent due mainly to electricity rates, which resulted in a 5.6 percent upward movement in the index for the group.
The index for the Education division fell 22.1 percent, primarily due to a decrease in tuition fees for the summer term and the Transport division index fell 0.3 percent, with lower prices for petrol contributed to this decline.
Jamaica’s inflation is tamed
Inflation in Jamaica is tamed. At least that is what data out of the Statistical Institute of Jamaica (STATIN) is suggesting, with negative inflation for the first four months of the year.
According to the latest data on the Consumer Price Index (CPI), the inflation rate for April 2020 was 0.2 percent. The increase for April comes on the heels of low price increases from December last year, leading to a rise of 0.5 percent in the CPI index followed by January, with a negative price movement of 1.1 percent. 
February ended, with an increase of 0.7 percent, while March had a decline of 0.3 percent and with the April fall, the year to date movement came out at negative 0.5 percent.
The inflation rate for April is not directly comparable to the previous periods, but whatever difference there maybe is unlikely to be material. Statin updated the basket of goods and services used in the compilation of the index. Accordingly, the products and services included in the new CPI basket and the weights associated with each item have changed based on a 2017 Household Expenditure Survey. The difference between the old and new weighting is not substantial, with Food and Non-Alcoholic Beverages weighting of 37.4 percent previously, is now down to 35.8 percent. The group of Housing, Water, Electricity, Gas & Other Fuels is up to 17.8 percent from 12.8 percent previously. Transport is now at 11.2 percent versus 12.8 percent in the old basket. Recreation, Sports & Culture is at 5 percent compared to 3.4 percent in the previous measure. The only other change of note was the areas of Insurance & Financial Services that is now 1.1 percent. Previously it was grouped with Personal Care, Social Protection & Miscellaneous Goods & Services that amounted to 8.4 percent of the overall basket, with the new weighting for the new category, down to 5 percent.
According to STATIN, the reduction in the GCT rate, from 16.5 percent to 15 percent, impacted the inflation rate for April 2020. The ‘Food and Non-Alcoholic Beverages’ recorded an increase in its index of 0.3 percent. The inflation rate for the division ‘Housing, Water and Electricity’ was 0.2 percent due to a rise of 3.1 percent in the index for the group ‘Water Supply and Miscellaneous Services Relating to the Dwelling.’ The Transport division declined by 0.5 percent and was mainly attributable to the reduction in the costs of petrol.