Rising Prices Reflected In Cayman’s Consumer Price Index Are Challenging For Cayman Households
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According to a report from the Economics & Statistics Office, the Consumer Price Index, which is a measure of inflation, increased by 0.03 per cent from December 2023 to March 2024. Based on the report, ten out of the twelve divisions analysed had higher price indices.
Index explanation
For members of the public who are unfamiliar with the twelve divisions, these are as follows:
- 01. Food & Non-Alcoholic Beverage
- 02. Alcohol and Tobacco
- 03. Clothing and Footwear
- 04. Housing and Utilities
- 05. Household Equipment
- 06. Health
- 07. Transport
- 08. Communication
- 09. Recreation and Culture
- 10. Education
- 11. Restaurants and Hotels
- 12. Miscellaneous Goods and Services
Concerning how these indices are chosen, the consumer price index report said:
The goods and services in the basket are classified into twelve (12) divisions using the United Nations’ Classification of Individual Consumption According to Purpose (COICOP).
In all, there are 2,227 items (7th-digit COICOP level) included in the basket collected from 203 providers/outlets in Grand Cayman, compared to 2008, when there were 1,647 items collected from 147 providers/outlets.
Breakdown of inflation
The indices are important to follow because any increases between periods are recorded as inflation.
Concerning increases from December 2023 to March 2024, these were outlined in the report as follows:
- The Housing and Utilities index increased by 0.2 percent. This was mainly due to increased actual rentals paid by tenants and a rise in the average price of gas (LPG/Propane). Materials for the maintenance and repair of the dwelling also increased this quarter.
- The Communication index moved up by 5.0 per cent for the quarter.
- Miscellaneous Goods and Services index: This division’s quarterly index rose 0.4 per cent. This rise can be attributed to the significant increase in the price of vehicle insurance by 7.5 per cent.
- Health: there was a 1.0 per cent increase in the index for the quarter.
- Clothing and Footwear index: The index rose by 1.8 per cent for the quarter.
- Education: there was a 4.4 per cent increase in this division for the quarter.
- Recreation and Culture: this index moved up by 1.7 per cent.
- Restaurants and Hotels: this index posted a 0.2 per cent quarterly increase.
- Food & Non-Alcoholic Beverages: this index recorded a 1.3 per cent increase this quarter, mainly due to the increase of other food products (not elsewhere specified) (5.9%), vegetables (5.8%) and mineral waters, soft drinks, fruits and vegetable juices (4.3%). Fish and seafood (2.3%), bread and cereals (1.3%) sugar, sugar confectionary and snacks (1.1%) and milk, cheese and eggs (0.2%) also reinforced the upward trend of the index. Tea, coffee and cocoa (1.2%), meat & meat products (3.1%), oils and fats (1.7%) and fruits (3.4%) all decreased this quarter in comparison to the previous quarter.
In addition to these elements, Cayman residents seeking new financing or who have variable-interest mortgages face upward pressures in interest rates each time the United States Federal Reserve raises them.
While the Federal Reserve has not raised these rates in the past couple of months, it acknowledged the harm caused by maintaining the existing high rates for a long period.
Concerning this, the Fed said in its June 2024 minutes that they “remained concerned that elevated inflation continued to harm the purchasing power of households, especially those least able to meet the higher costs of essentials like food, housing, and transportation.”
This acknowledgement is important as it demonstrates that powerful regulators like the Fed, whose actions ultimately impact interest rates in the Cayman Islands, are fully aware of inflation’s impact on low-income households but are slow to act.
Notwithstanding what international regulators may be doing, Cayman authorities who are aware of the effects of inflation may make their own decisions about what would help residents. One option is to introduce or amend policies to regulate interest rates, utility rates, food prices and housing prices. Alternatively, where feasible and in the interests of the public, authorities might consider allowing new market entrants to compete with existing monopolies, leading to more efficient services, products and price reductions in some areas.
