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Following the release of the latest Guernsey Quarterly Inflation Bulletin that confirmed another increase in Guernsey’s rate of inflation to 8.5%, the Institute of Director’s Guernsey branch has commented on what it means for the island.
Richard Hemans is the the IoD’s lead on economics:
"Guernsey’s rate of inflation continues to increase, reaching another multi-decade high and putting further pressure on islanders’ finances. Guernsey’s inflation trend is now out of kilter with most other developed economies where inflation is starting to fall, although Jersey’s latest RPI figure is not announced until tomorrow.
Inflation will continue to reduce earnings and therefore consumer spending, which will dampen economic growth. Businesses will continue to experience significant cost pressure, which will undermine their investment and employment plans. The cost of providing government services will continue to rise, making the fiscal deficit even higher.
Of the fourteen categories that are measured, the biggest impacts are being felt in food, energy, housing and leisure services, which contributed well over half of the inflation experienced in 2022. Whilst the increase in inflation has been moderating quarter on quarter since March 2022, it is disappointing to see inflation continue to rise. With inflation excluding interest rates also at 8.5%, it is likely that the increase in housing costs and specifically interest rates could drive inflation higher in the short term. Whilst energy costs have been falling, the costs of food and housing are still elevated.
Future inflation will also depend on the pay increases employers accept in the coming months. Higher settlements could feed inflation and erode profits, whilst lower settlements will weaken personal finances at a time when islanders are already facing rising interest rates and looming tax rises."
