Inflationary Outturn-December 2012

Recently released data indicate that for the month of December consumer prices rose by 1.0%, the fastest rate of increase since March 2011. The lingering effects of Hurricane Sandy on the Agriculture production have resulted in the “Vegetables and Starchy Foods” and the “Fruits” subdivisions registering a 7.1% and 2.5% increase, respectively.

 

As such, “Food and Non Alcoholic Beverages”, the most heavily weighted division, recorded the largest movement in its index of 1.9% for the month. Additionally, in keeping with the traditional increases in shopping and social events during the holiday season, the index of “Clothing and Footwear” had the second highest movement of 0.8% while “Alcoholic Beverages and Tobacco” went up by 0.5%.

The outturn in December brings the fiscal year to date inflation to 6.2% which is still below the 7.5% - 9.5% BOJ target for the 2012/2013 fiscal year. Point to point inflation was 8.0%. Inflationary pressures are likely to increase in subsequent periods given the rapid depreciation in the currency, the continued upward movement in oil prices and possible increases in food prices as a result of the current drought.

Further, indications from the Minister of Finance that there could be additional tax measures to assist in closing the gap in the fiscal accounts could put further upward pressure on consumer prices.