Economic and Statistic Office figures released last week show the cost of food, goods and services and household equipment are contributing more to cost of living pressures in Cayman than increasing utility bills.
The ECO’s semi-annual economic report says Grand Cayman’s 3.7 per cent rate of inflation was driven by a 6.3 per cent increase in the cost of personal goods and services, a 5.9 per cent increase in the cost of food and a 5.3 per cent rise in household equipment prices.
By contrast, utilities bills rose by an average of 2.8 per cent in the 12 months to June 2007.
Senior Economist with the ECO Adolphus Laidlow says increasing food prices are a global phenomenon, influenced by countries such as China, whose rapid growth is putting increased strain on the world’s food supplies.
‘You will find it is not only in Cayman but in every part of the world; food prices are much higher,’ he said. ‘The emerging countries are increasing demand for food.’
The inflation figure of 3.7 per cent is fractionally above government’s forecast figure of 3.6 per cent for the 2007 calendar year, and, according to Mr. Laidlow, an acceptable outcome.
‘3.7 per cent is not bad in that we are reverting back to the lower levels. After Ivan it was 11.4 per cent for a particular quarter, so what this is doing is reverting back to those levels. If you took out the increasing cost of food, inflation would have actually been falling or close to zero.’
The report says the Cayman Islands economy is on target to achieve real GDP growth of 3.8 per cent.
Despite strong economic growth, the number of work permits issued declined in the first half of 2007, down 986 to 20,286. The decline in work permits was mainly in the trade/technical skilled and unskilled categories, while permits in professional fields increased 11.7 per cent.
Mr. Laidlow said the drop in work permits was mainly in the construction industry, which is coming back to a normal level of activity after the post-Ivan boom. ‘The construction and unskilled areas are returning back to normal … and that’s expected,’ he said.
The number of air and cruise arrivals was up 3.3 per cent in the first half of this year, although these figures are tempered by more recent arrival figures that the survey did not take into account that show cruise arrivals falling.
163,086 people visited the Cayman Islands by airplane in the first half of the year, up 8.4 per cent on the first half of 2006, while 1.08 million cruise ship visitors visited our shores during the same period, up 2.6 per cent. The USA continues to be the major source of air arrival visitors, accounting for 81.5 per cent of total air arrivals.
In what will give a boost to government coffers, the total value of imports as at June 2007 grew by 17.8 per cent
‘The main anomaly we see, is we would have expected imports to keep falling to around a pre-Ivan level but instead we see that imports had a significant increase of about 17.8 per cent,’ said Mr. Laidlow.
The report shows Cayman’s financial sector going from strength to strength, with increases seen in insurance company licenses, funds, stock exchange listings and market capitalization and company registrations.
The Cayman Islands Stock Exchange proved particularly bullish. There were 282 new listings on the CSX – a 26.5 per cent increase – and stock market capitalisation was up US$36 billion to US$126.6 billion.
Mr. Laidlow said a new basket of goods that the ECO will begin using next year to measure the Consumer Price Index will take into account more relevant technology items – like cell phones – but he doesn’t expect the new basket will materially change the end result.
‘Much of the inflation is not caused by demand here but by what happens in the international economy, because we have to import so many things,’ he explained.