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Guernsey's inflation rate for 2020 was the lowest recorded figure for four years and has been attributed to the impact of Covid, a modest fall in mortgage rates and a drop in fuel prices.
Guernsey’s annual inflation, as measured by the RPIX (‘core’ inflation excluding mortgage interest payments) was 1.6% in December 2020. This is 0.4% lower than in the previous quarter and 0.8% lower than in December 2019.
Those figures compare to RPIX rates of 1.4% in the UK and 1.2% in Jersey, against whom Guernsey's inflation is measured.
The ‘all items’ RPI annual inflation was 1.0% in December 2020.
Pictured: The annual percentage change in RPIX since 2010, which shows that Guernsey's inflation rate has been more stable than the UK's or Jersey's in the last decade.
Ravenscroft's Chief Investment Officer Kevin Boscher said that while it represented a positive increase in the Retail Price Index, it was notably lower than the 2.3% RPI for 2019.
He attributed this to:
· Cheaper energy and fuel costs as oil/gas/diesel/petrol prices all falling during the year;
· Mortgage rates falling modestly during 2020;
· The impact of Covid ie. not all data collected as usual, some prices didn’t rise as usual due to things being closed and people changing consumption patterns;
· The Pound Sterling strengthening circa 4/5% vs the Dollar, for example, reducing the imported prices of goods.
SPF Private Clients Managing Director Pierre Blampied confirmed that there had been modest interest rate reductions in 2020, contributing to the fall in RPI.
Commenting on trends the industry had seen in 2020, he said: "The housing market was extremely busy last year with transactions up and come the end of the year there was a lack of stock for both rentals and properties for sale.
"People did take mortgage payment holidays but this was for a short period based on Guernsey’s excellent handling of the pandemic."
Last year's lockdown measures posed unprecedented difficulties for data analysts, who were unable to collect all of the information they usually would due to many businesses being completely closed and others extremely busy.
Pictured: Quarterly and annual changes in inflation since 2018. Guernsey's RPIX figures ranged between 1.6% and 2.9% between December 2016 and September 2020.
Advice was sought from the UK Office for National Statistics, who shared the guidance provided by Eurostat on how to maintain the indices in these circumstances. The guidance covered two areas:
1. Goods and services that were still available to purchase, such as grocery items, medicines etc, but for which prices could not be collected.
In this event, the missing prices were assumed to have changed in the same way that other, similar prices had changed, e.g. if prices could not be collected from a particular shop, the prices of items from that shop were assumed to have changed by the same proportion as prices of those same items from other shops.
2. Goods and services that were not available, such as flights, hairdressing services etc, even if prices could still be collected from websites etc.
The prices were assumed to have either remained the same as for the previous quarter (for prices not affected by seasonal variations), or changed in the same way they would have changed at the same time in previous years (for prices susceptible to seasonal variations).
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