Consumers are bawling as prices continue to soar.
Last week, the National Flour Mills (NFM) increased the price of wholesale flour by a staggering 33 per cent and suggested a retail price increase of 28 per cent. In a media release, NFM said if a typical family uses a two-kilo bag of Ibis Flour monthly, this would increase from $14.77 to $18.93 or 28 per cent.
This is the second time since January that NFM raised their prices.
The statistics reflect the increase in basic food prices.
The overall inflation rate in T&T from 2014 through 2022 was 2.5 per cent. However, the average annual inflation rate under the category “food” was 4.7 per cent per year from 2014 through 2022.
To give an example, a 2.5 per cent annual inflation rate means that—on average—a dollar buys two per cent fewer goods and services than it did the year before.
University of the West Indies (UWI) economist Dr Regan Deonanan in an interview with the Sunday Guardian explained how the cost of living is measured and the ability of the Government to raise wages.
He also said in the first three months of 2022, the average inflation in food prices was 4.8 per cent compared to the average of 4.4 per cent in 2021 and he expects the situation to worsen.
“Food inflation is expected to increase in 2022 given the challenging state of the global economy and our reliance on imports. It is noteworthy though that T&T has sustained previous years of high food inflation: ten per cent in 2014, 8.6 per cent in 2015, and 7.4 per cent in 2016.”
Breaking percentage increases into real dollars and cents, a look at prices of four basic food items–flour, sugar, oil and rice–shows the sharp increases in prices over a three-year period.
A 1.5 litre of Happi oil was $21.95 in 2020 and in 2022 it jumped to $33.95. A 900 gram Happi sugar in 2022 was $8.95 and by 2022 it cost $14.95. An 8 kg Happi rice which cost $79.95 in 2020 is now costing $99.95 in 2022. While an Ibis 10 kg cost $54.95 in 2020 and by 2022 the price shot up to $94.95.
This period in which the inflation rate of 2.5 per cent covers, corresponds to the period that public-sector unions such as the Public Services Association (PSA), representing police, fire and prison officers, were initially offered a two per cent salary increase by the Chief Personnel (CPO) in May.
Dr Regan Deonanan, senior economist at the University of the West Indies.
PHOTO DR REGAN DEONANAN
Cost of living
Deonanan explained the cost of living (COL) refers to the cost of maintaining an acceptable standard of living. It corresponds to the cost of necessities of the household such as, but not limited to, food, housing, transportation and healthcare. An increase in the COL from one year to the next corresponds therefore to an increase in the cost of maintaining the same standard of living as the previous year.
He added that in T&T, the most readily available measure for increases in the COL is the inflation rate and the inflation rate is calculated from the Retail Price Index (RPI), where changes in the RPI correspond to inflation.
He also said the RPI was composed of the cost of 15 categories of goods and services locally, weighted by the importance, inter alia, to the household. The RPI covers items such as food, clothing, housing, transportation, health and education, among other important items to the household.
According to Deonanan, there has been a fluctuation in the price increases with some years being worse than others.
“According to data taken from the Central Bank of T&T, the average overall inflation rate was 2.5 per cent over the period 2014 through 2022 (considering only the first three months of 2022). However, the overall inflation rate in some years was as high as 5.7 per cent (in 2014) and 4.6 per cent (in 2015). This is important to note as individuals may particularly remember these more difficult years, and take what obtained in those years as representative of the entire eight-year period initially described.”
On his Twitter account last month, Finance Minister Colm Imbert said the wage bill annually is TT$19 billion which is 40 per cent of the annual revenue, and he has repeatedly said that the Government does not have much money to raise wages.
Deonanan weighed in on the debate over the Government’s ability to raise wages, pointing out that given the war in Ukraine and other external factors, the economic forecast may not be “entirely optimistic”.
He said there are two sides to the story–on one hand, the cost of living has increased and negatively impacted households. On the other hand, national income has recently fallen.
“The increase in COL without a commensurate increase in wages and salaries would correspond to a diminished standard of living for households. On the other hand, national income has recently fallen, and it is not clear whether and how much it may increase in the immediate future.
“Importantly, increases to wages and salaries in any sector of the economy in the absence of sufficient revenue increases, and by extension, economic growth, represent a change in how we allocate national resources across the entire economy.
“Giving more to one sector, in such a scenario, may come at the cost of another sector. These two sides need to be weighed carefully together, perhaps to ensure the sustainability of as many households as possible in T&T.”
Average inflation means the average rate at which the prices of goods and services change within a year.
Food inflation in layman’s language is the rise in the cost of an essential food item relative to the previous price.
INCREASES IN BASIC FOOD PRICES
2020 2021 2022
Happi Oil 1.5 litre $21.95 $24.95 $33.95
1 gallon $49.95 $74.95 $84.95
Happi Sugar 900 gram $8.95 $11.95 $14.95
Happi Rice 8kg $79.95 $84.95 $99.95
Ibis Flour 10kg $54 .95 $69.95 $94.95