While prices overall have stayed flat over the 12 months ending in the first quarter of 2011, there has been significant price volatility affecting rent, energy, transport and food, according to the latest consumer price index figures.
The consumer price index, which consists of a basket of 1,393 products and services the Cayman Islands Economics and Statistics Office regularly observes for price changes, increased by 0.03 per cent between the end of March 2010 and March 2011, ESO data shows.
This general development of low inflation may be at odds with what some people perceive in terms of their household spending, mainly because not everyone benefitted from the substantial decline in rent during the 12-month period.
Actual and imputed housing rentals are down by 4 per cent and 11 per cent, respectively, compared to last year.
Because the cost of accommodation, whether rental or mortgage payments, is generally the single largest item in a family’s household budget, the consumer price index weights housing costs more heavily than any other item in the CPI product basket. As a result, 30 per cent of the CPI is based on housing costs alone.
Homeowners, in contrast, are not going to benefit from lower rental costs as their mortgage payments will be unaffected by rental cost variations. Homeowners who lease their properties are in fact subject to a double whammy of lower rental income and higher maintenance and repair costs, while their mortgage payments are likely to have remained constant.
The cost of maintenance and repairs of properties has increased by more than 8.3 per cent over the 12 months ending in the first quarter.
This means consumers who rent were able to offset most of the price increases – transport, energy and food – through lower rental payments, whereas homeowners were not.
In the overall price statistics this translates into virtually unchanged prices compared to one year ago. Yet many households will still be worse off due to the significantly higher costs for transport (9.3 per cent), in particular the cost of operating a vehicle (12.3 per cent); the rising average cost of electricity, gas and other fuels (14.8 per cent); water (4.4 per cent); and food (2.7 per cent).
Higher energy, utility and transport costs were largely due to rising oil prices, as the price for a barrel of crude oil rose from $80 to $105 during the same time period.
Meat (6.8 per cent), fish and seafood (6 per cent) and vegetables (4.8 per cent) were the main drivers of food prices, while cost of fruits dropped by 4.4 per cent.
Household equipment also saw average cost increases of 1.6 per cent with non-electric kitchen items 24.2 per cent more expensive. Increases were also recorded for household appliances (6.2 per cent), household textiles (6.2 per cent) and furniture and furnishing (4.7 per cent).
The price of clothing overall declined by 0.7 per cent, but the cost of footwear went up by 7 per cent.
Health costs, meanwhile, increased by 1 per cent year on year.
Other notable price declines were observed for communication equipment and services (-19.1 and -0.6 per cent respectively), vehicle purchases (-3.5 per cent), hotel accommodation (-10.4 per cent) and newspapers, books and stationery (-5.3 per cent).
Homeowners who lease their properties are in fact subject to a double whammy of lower rental income and higher maintenance and repair costs.
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