Friday 24 April 2020
The Guernsey Quarterly Inflation Bulletin is published today on www.gov.gg/rpi. It contains the retail price indices (RPI and RPIX) as at the end of March 2020 as usual, with some additional commentary on the impacts of the ongoing coronavirus situation.
Helen Walton, Head of Data & Analysis said,
"While it is business as usual for the Data & Analysis team, just from home rather than Sir Charles Frossard House, there have been some challenges in calculating the retail price indices this quarter. Some of the goods and services that are included in the notional shopping basket that we track each quarter were not available in March. The basket includes all sorts of things, including gardeners, builders and hairdressers plus air and sea fares and also hotel, restaurant and pub prices for example. It's normal for a few prices to be unavailable each quarter, but not on the scale experienced in March.
Guidance was issued by the UK Office for National Statistics and Eurostat, which we have followed in order to ensure the indices have been calculated according to best practice. Depending on whether the goods and services were available, but we couldn't find out the prices due to being unable to access or contact shops or the goods and services were unavailable, slightly different approaches needed to be taken. Prices of available items that we couldn't collect were assumed to have changed by the same amount other similar items changed by. Prices of unavailable items were either assumed to be the same as last quarter or, in the case of seasonal items, assumed to have changed by the amount they would normally change by at this time of year. Full details are included in the bulletin."
Liz Laine, Senior Economic and Policy Analyst added:
"The approach taken, as recommended internationally, has a stabilising effect on the indices. It prevents the prices of those items that are available and could be collected impacting the headline inflation rate by more than they should.
The approach means that in areas where products are not available, the group level inflation rates may seem peculiar. For example, passenger travel off island has more or less stopped, but in order to maintain the stability the calculation must include an assumed price. It is therefore assumed that the price of air and sea fares has increased since December in line with their normal seasonal patterns. If this mechanism were not applied it could result in a downward pressure on the annual change in the inflation measure, which does not really reflect people's experience of prices day to day. In groups where goods are generally available the indices are more informative.
The inflation indices are also built to reflect "average" household spending patterns, but in practice, peoples spending are far from normal right now. So people should not expect this measure to accurately reflect changes in the amount they are spending on goods. The inflation indices are designed to show price changes on a like for like basis over time. When goods and services do become available again it will allow us to compare the relative cost of purchasing the same profile of goods and services before and after the restrictions to limit the spread of COVID-19."
