From all in­di­ca­tions, the gen­er­al in­crease in prices in T&T (the in­fla­tion rate) slowed sig­nif­i­cant­ly dur­ing the sec­ond half of 2023, con­tin­u­ing in­to the first month of 2024.

In its Jan­u­ary 2024 Eco­nom­ic Bul­letin, the Cen­tral Bank re­port­ed, “Head­line in­fla­tion mea­sured 0.7 per cent (year-on-year) in De­cem­ber 2023, ac­cord­ing to da­ta from the Cen­tral Sta­tis­ti­cal Of­fice (CSO). This rep­re­sent­ed a de­cline from 4.7 per cent in Ju­ly 2023.

“Re­treat­ing in­fla­tion­ary con­di­tions were ev­i­dent in both food and core in­fla­tion over the six-month pe­ri­od. Food in­fla­tion de­clined from 8.6 per cent in Ju­ly 2023 to -1.1 per cent in De­cem­ber 2023, while core in­fla­tion mod­er­at­ed to 1.2 per cent in De­cem­ber 2023, down from 3.7 per cent in Ju­ly 2023.”

In its most re­cent re­port on in­fla­tion, the CSO in­di­cat­ed that the all-items in­dex of price changes (head­line in­fla­tion) rose by 0.3 per cent in Jan­u­ary 2024, com­pared to Jan­u­ary 2023. That was dri­ven by a 1.9 per cent de­cline in the in­dex food for food and non-al­co­holic bev­er­ages. The CSO re­port­ed that the av­er­age price of cloth­ing and foot­ware was 3.1 per cent low­er in Jan­u­ary 2024 than in Jan­u­ary 2023; the cat­e­go­ry of hous­ing, wa­ter, elec­tric­i­ty, gas and oth­er fu­els was 1.1 per cent low­er in Jan­u­ay 2024 than a year ear­li­er and the cat­e­gories of home own­er­ship and fur­nish­ings, house­hold equip­ment and rou­tine main­te­nance of the house both de­clined by 1.6 per cent.

On the oth­er hand, the cat­e­go­ry of al­co­holic bev­er­ages and to­bac­co in­creased by 5.1 per cent in Jan­u­ary 2024 com­pared to Jan­u­ary 2023. And health was high­er by 7.9 per cent, com­mu­ni­ca­tion by 7 per cent and prices at ho­tels, cafes and restau­rants rose by an av­er­age of 4.5 per cent be­tween Jan­u­ary 2023 and Jan­u­ary 2024.

Head­line in­fla­tion in De­cem­ber 2022 was 8.7 per cent, com­pared to a year ear­li­er, while food and non-al­co­holic bev­er­ages in­creased by 17.3 per cent be­tween De­cem­ber 2021 and De­cem­ber 2022.

What this means is that in­fla­tion in T&T dropped from 8.7 per cent at the end of 2022 to 0.7 per cent at the end of 2023. Quite a re­mark­able achieve­ment.

The rea­sons for the sharp in­crease in head­line in­fla­tion in 2022 con­tain some hints about pos­si­ble price trends in 2024.

In its May 2023 Ar­ti­cle IV con­sul­ta­tion re­port on T&T, the In­ter­na­tion­al Mon­e­tary Fund (IMF) said the spike in prices in 2022 was dri­ven by “im­port­ed en­er­gy and food prices, the par­tial lib­er­al­i­sa­tion of fu­el prices and do­mes­tic weath­er-re­lat­ed shocks.”

Of those three fac­tors, it is clear that most coun­tries in the world ex­pe­ri­enced high­er en­er­gy and food prices in 2022 be­cause of sup­ply-chain dis­rup­tions and the Russ­ian in­va­sion of Ukraine.

In its Jan­u­ary 2024 Eco­nom­ic Bul­letin, the Cen­tral Bank opined, “Though glob­al in­fla­tion­ary pres­sure re­ced­ed in 2023, ma­jor in­fla­tion­ary risks per­sist­ed with prospects for sup­ply-side shocks re­lat­ed to geopo­lit­i­cal con­flicts across the world.” The Cen­tral Bank is sig­nalling the pos­si­bil­i­ty that geopo­lit­i­cal con­flicts could again have an im­pact on lo­cal in­fla­tion in T&T in 2024.

Cen­tral Bank Gov­er­nor, Dr Alvin Hi­laire, said in an in­ter­view with the Busi­ness Guardian in Jan­u­ary that T&T im­ports 70 per cent of its in­fla­tion.

On the is­sue of the par­tial lib­er­al­i­sa­tion of fu­el prices in 2022, the Gov­ern­ment in­sti­tut­ed in­creas­es in the price of fu­els in April and Sep­tem­ber 2022. By my cal­cu­la­tion, the price of diesel went up by 29.3 per cent from $3.41 per litre to $4.41 per litre in that six-month pe­ri­od in 2022. Pre­mi­um gaso­line in­creased by 34.7 per cent from $5.75 to $7.75 per litre and su­per prices moved up by 40.2 per cent from $4.97 to $6.97 per litre.

In­creas­ing fu­el prices twice in 2022 would have re­duced the sub­sidy on fu­els, there­by im­prov­ing the coun­try’s fis­cal po­si­tion, but the in­creas­es would have had a sig­nif­i­cant pass-through im­pact on in­fla­tion in the T&T econ­o­my.

Ac­cord­ing to the May 2023 IMF Ar­ti­cle IV re­port on T&T, “The trans­porta­tion sub­com­po­nent of the con­sumer price in­dex reached an an­nu­al in­fla­tion rate of 14.6 per cent in De­cem­ber 2022, up from just 2.2 per cent in March 2022.”

Would Min­is­ter of Fi­nance, Colm Im­bert, go for the full lib­er­al­i­sa­tion of fu­el prices in 2024? Not with­out some very clear analy­sis of the im­pact of high­er fu­el prices on the do­mes­tic econ­o­my, both in terms of the in­fla­tion­ary im­pact and the im­pact on the coun­try’s fis­cal for­tunes.

In my view, the re­al un­known fac­tor in lo­cal in­fla­tion this year is the im­pact of weath­er-re­lat­ed shocks, ei­ther a drought in the cur­rent dry sea­son or flood­ing in the wet sea­son in the lat­ter half of 2024.

A study by the Eco­nom­ic Com­mis­sion of Latin Amer­i­ca and the Caribbean (Eclac) on the eco­nom­ic im­pact of the Oc­to­ber 2018 flood­ing in Trinidad es­ti­mates that the cost of that event to the na­tion was US$12.6 mil­lion, equal to 0.05 per cent of GDP. But the Cen­tral Bank’s 2018 An­nu­al Eco­nom­ic Sur­vey does not men­tion the flood­ing event, stat­ing, “Food in­fla­tion was rel­a­tive­ly well con­tained in 2018, av­er­ag­ing 1.1 per cent. This com­pares with food in­fla­tion of 2.9 per cent in 2017.”

Min­i­mum wage im­pact

For the year to date, the fol­low­ing en­ti­ties have an­nounced in­creas­es their prices: TCL (ce­ment); Flow (ca­ble and broad­band); fast-food providers KFC and Star­bucks, whose par­ent com­pa­ny is the pub­licly list­ed Pres­tige Hold­ings Ltd; fast-food providers Roy­al Cas­tle and Rit­u­als as well as Blue Wa­ters.

In ex­plain­ing the de­ci­sion by Pres­tige Hold­ings to in­crease the prices of its KFC prod­ucts, the com­pa­ny’s CEO Si­mon Hardy said, “The main jump for us was the min­i­mum wage as we em­ploy 3,300 peo­ple.  We on­ly made the changes on Feb­ru­ary 22. But in­evitably, a busi­ness such as ours can’t, with an em­ploy­ee base such as ours, hold those prices for­ev­er. Just mak­ing a lit­tle com­par­i­son, you know. Every­one thinks that there’s a lot of prof­it be­ing made. We are a high-sales busi­ness but a low-mar­gin busi­ness, on­ly 4.2 per cent of our sales is prof­it. So, we have a lot of sales, but it’s not a lot of prof­it.”

The prices of KFC prod­ucts al­so went up in De­cem­ber.

The 17.1 per cent in­crease in min­i­mum wage to $20.50 an hour from $17.50 an hour took ef­fect on Jan­u­ary 1, 2024.

The Cen­tral Bank’s No­vem­ber 2023 Mon­e­tary Pol­i­cy Re­port con­tains a note ti­tled ‘The im­pact of the in­crease in the min­i­mum wage on in­fla­tion.’

In es­ti­mat­ing the di­rect ef­fect of the in­crease in the min­i­mum wage on the gen­er­al price lev­el, the note states that ap­ply­ing the au­tore­gres­sive dis­trib­uted lag mod­el sug­gests that the 17.1 per cent hike in the min­i­mum wage in­creas­es the head­line in­fla­tion rate im­me­di­ate­ly by an an­nu­alised 1.7 per cent.

“With the num­ber of min­i­mum wage earn­ers cur­rent­ly ac­count­ing for 16 per cent of to­tal per­sons em­ployed, the po­ten­tial to­tal im­pacton head­line in­fla­tion is as­sessed to be mod­er­ate,” said the Cen­tral Bank, adding: “How­ev­er, should busi­ness­es ad­just the prices of their goods and ser­vices in di­rect re­sponse to high­er labour costs, when com­bined with an im­mi­nent in­crease in elec­tric­i­ty tar­iffs and the im­ple­men­ta­tion of the prop­er­ty tax, head­line in­fla­tion could be im­pact­ed more sig­nif­i­cant­ly.”