The lat­est da­ta on re­tail prices re­leased by the Cen­tral Sta­tis­ti­cal Of­fice (CSO) in­di­cate a marked de­cel­er­a­tion in in­fla­tion­ary pres­sures in No­vem­ber 2012. Head­line in­fla­tion, mea­sured by the 12-­?month change in the In­dex of Re­tail Prices (RPI), slowed to 8.1 per cent in No­vem­ber 2012 from 9.4 per cent in Oc­to­ber.

Food price in­fla­tion, which con­tin­ues to ex­ert a strong in­flu­ence on the head­line in­fla­tion rate, slowed to 14.9 per cent (year-on-year) in No­vem­ber 2012, down from 18.2per cent in Oc­to­ber. The im­pact of the re­moval of the Val­ue Added Tax (VAT) on sev­er­al­food items was not re­flect­ed in the in­fla­tion da­ta for No­vem­ber 2012.

In­stead, this mod­er­a­tion in food price in­fla­tion re­flect­ed, for the most part, the de­cline in the price of­fruits (a fall of 0.6 per cent in No­vem­ber com­pared to an in­crease of 5.7 per cent in Oc­to­ber) along with slow­er year-­on-year price in­creas­es for veg­eta­bles (28.1 per cent in No­vem­ber com­pared with 34.9 per cent in Oc­to­ber), meat (10.3 per cent com­pared with 10.5 per cent), milk, cheese and eggs (0.4 per cent com­pared with 2.6 per cent), oils and fats (6.1 per cent com­pared with 12 per cent) and sug­ar and con­fec­tionery prod­ucts (2.7 per cent com­pared with 3.1 per cent).

In con­trast, prices rose at a faster rate for fish (9.0 per cent from 8.0 per cent in Oc­to­ber) and bread and ce­re­als (1.4 per cent from 1.1 per cent). It is worth not­ing that the CSO is in the process of up­dat­ing its cur­rent method­olo­gies and prac­tices for com­pil­ing re­tail prices in Trinidad and To­ba­go.

These re­vi­sions in­cludeal­ter­ations to the method for es­ti­mat­ing the food com­po­nent to more ac­cu­rate­ly re­flect house­hold spend­ing pat­terns and the chang­ing na­ture of the cur­rent bas­ket of con­sumer items. This bas­ket is ex­pect­ed to in­clude some new tech­no­log­i­cal goods and ser­vices suchas mo­bile com­mu­ni­ca­tion de­vices as well as en­er­gy con­ser­va­tio­prod­ucts.

The re­bas­ing ex­er­cise is­ex­pect­ed to be com­plet­ed in ear­ly 2013. Core in­fla­tion, which fil­ters out the im­pact of food prices, mea­sured 3.1 per cent in No­vem­ber 2012, un­changed from the pre­vi­ous month. The sub-in­dices for al­co­holic bev­er­ages and to­bac­co and health post­ed year-­on-­year in­creas­es of 4.7 per cent and 5.7 per cent, re­spec­tive­ly.

These in­creas­es were how­ev­er coun­ter­bal­anced by a re­duc­tion of 3.4 per cent in the ra­te­of in­crease in one of the­larg­er com­po­nents of the core bas­ket the clothin­gand footwear­sub-­cat­e­go­ry. Pri­vate sec­tor cred­it­edgedup in Oc­to­ber 2012 but was still broad­ly un­re­spon­sive to cur­rent fi­nan­cial con­di­tions. On a year-­on-­year ba­sis, pri­vate sec­tor cred­it grant­ed by the con­sol­i­dat­ed fi­nan­cial sys­tem in­creased by 3.7 per cent in Oc­to­ber 2012, up from 3.2 per cent in Sep­tem­ber.

Of the ma­jor cat­e­gories of pri­vate sec­tor lend­ing, con­sumer and busi­ness cred­it post­ed small year-­on-­year in­creas­es of 2.9 per cent and 2.1 per cent,re­spec­tive­ly, while re­al es­tate mort­gage lend­ing con­tin­ued to ex­pand at a ro­bust rate (11per cent)in Oc­to­ber 2012.

Liq­uid­i­ty in the do­mes­tic fi­nan­cial sys­tem re­mained high main­ly on ac­count of sub­stan­tial net fis­cal in­jec­tions dur­ing No­vem­ber and the first half of De­cem­ber 2012. Com­mer­cial banks' hold­ings of ex­cess re­serves at the Cen­tral Bank in­creased to a dai­lyav­er­a­ge­of $4,075 mil­lion­inthe pe­ri­od De­cem­ber1-­18, 2012, up from $3,342 mil­lion­inthe pre­vi­ous month.

Ex­cess liq­uid­i­ty con­tin­ued to dri­ve down in­ter­est rates on short-­term gov­ern­ment­pa­per. The rate on the three-­month Trea­sury Bills fell to 0.39 per cent as at De­cem­ber 19, 2012 from 0.46per centin No­vem­berand 0.54per cent in Oc­to­ber.

The six-­mon­thT-Bill rat­ede­clined­to 0.47per­centin De­cem­ber from0.58 per cent in­Sep­tem­ber.

Eco­nom­ic ac­tiv­i­ty is like­ly­tore­main­some­what­sub­dued in thethird quar­ter of 2012, de­spite aslight uptickin the en­er­gy and non-­en­er­gy sec­tors. The slow­pace of ex­pan­sion­in con­sumer and busi­ness cred­it sug­gests that ag­gre­gate de­mand has not picked up suf­fi­cient­ly to cre­ate the mo­men­tum re­quired for a sus­tained eco­nom­ic re­cov­ery.

With un­der­ly­ing in­fla­tion­ary pres­sures in check,the Bank con­tin­ues to adopt an ac­com­moda­tive mon­e­tary stance to sup­port the resur­gence of eco­nom­ic ac­tiv­i­ty, es­pe­cial­ly in the non-­en­er­gy sec­tor. Against this back­ground, the Bank has de­cid­ed to main­tain the 'Re­po' rate at 2.75 per cent.

The Bank will con­tin­ue to keep eco­nom­ic and mon­e­tary con­di­tions un­der close re­view in the­com­ing­months. The next 'Re­po' rate an­nounce­ment is sched­uled for Jan­u­ary 25, 2013.

Source: Cen­tral Sta­tis­ti­cal Of­fice.