Short-term Inflation analysis and forecast. April 2018 RESEARCH SERVICES DEPARTMENT RESEARCH AND ECONOMIC PROGRAMMING DIVISION

Transcription

1 Short-term Inflation analysis and forecast April 2018 RESEARCH SERVICES DEPARTMENT RESEARCH AND ECONOMIC PROGRAMMING DIVISION

2 c 2018 Bank of Jamaica Nethersole Place Kingston Jamaica Telephone: (876) Fax: (876) Website: ISSN Printed in Jamaica

3 Preface This report reviews recent trends in inflation and presents the outlook for the remainder of the fiscal year. The analysis is based on trends in short-term domestic demand and supply indicators as well as imported inflation. These factors inform the assumptions for the shortterm inflation forecasting model Monthly Inflation Sub-Index Model (MISI). Table of Contents 1.0 Review of Outturn Factors Underpinning the Revised Forecast Trends in demand Trends in supply Import prices Trends in Core Inflation Revised Forecast Summary and Conclusion 8 Appendices 9 Tables and Figures Figure 1: Trend in Monthly Inflation... 1 Figure 2: Regional Inflation... 1 Figure 3: Inflation Contribution... 2 Figure 4: Short-term Indicators of Demand... 3 Figure 5: Industrial Electricity Sales... 4 Figure 6: International Oil Prices... 5 Figure 7: International Grains Prices... 5 Figure 8: Core Inflation (12-month change).. 6 Figure 9: Monthly Inflation Fan Chart... 7 Figure 10: Trends in Selected Agriculture Production... 9

4 Short-term Inflation Analysis and Forecast 1.0 Review of Outturn For April 2018, there was a deflation of 0.4 per cent, which compares to inflation of 0.3 per cent recorded for April 2017 and average inflation of 0.0 per cent for April of the last five years. Given the April 2018 outturn, annual point-to-point inflation was 3.2 per cent, below the 4.8 per cent as at April 2017 and the 3.9 per cent outturn as at March 2018 (Figure 1). Figure 1: Trend in Monthly Inflation The outturn for April 2018 was below with the 5-year monthly average for March. Deflationary pressure was prominent in all regions for April The Rural Areas (RA), however, exhibited the strongest deflationary pressure due mainly to a larger decline in the Housing, Water, Electricity and Gas (HWEG) division. Figure 2: Regional Inflation April 2018 Research Services Department 1

5 Short-term Inflation Analysis and Forecast The deflationary pressure for April 2018 resulted from a reduction in Housing, Water, Electricity, Gas & Other Fuels (HWEG). This stemmed mainly from a reduction in electricity rates for the month, due to a decline in the fuel rate. This was partly offset by inflationary impulses primarily reflected in Transport (TRAN) due to higher prices for petrol and its related products. Figure 3: Inflation Contribution Deflation for April 2018 primarily reflected reductions in electricity rates. Blue bars = positive and Red bars = negative MIS= Miscellaneous Goods & Services, R&A=Restaurants & Accommodation Services, ED=Education, R&C=Recreation & Culture, COM=Communication, TRAN= Transport, HLTH=Health, FHERM=Furnishings, Household Equipment & Routine Household Maintenance, HWEG=Housing, Water, Electricity, Gas & Other Fuels, C&F=Clothing & Footwear, ABT=Alcoholic Beverages & Tobacco, FNB=Food & Non- Alcoholic Beverages Source: STATIN April 2018 Research Services Department 2

6 Short-term Inflation Analysis and Forecast 2.0 Factors Underpinning the Revised Forecast 2.1 Trends in demand The main indicators of domestic demand monitored by the BOJ increased for the review period. The quarterly change 12-month average of the real value of imports is estimated to have accelerated to 2.8 per cent for April 2018 relative to 1.6 per cent in March For April 2018, the estimated quarterly 12-month average change in the real value of debit and credit card transactions accelerated slightly to 2.7 per cent relative to 2.6 per cent in the previous month (see Figure 4). Figure 4: Short-term Indicators of Demand The indicators of domestic demand monitored by the BOJ increased. 1 Revised down from 1.8 per cent April 2018 Research Services Department 3

7 Short-term Inflation Analysis and Forecast 2.2 Trends in supply In April 2018, the decline in the Vegetables and Starchy Foods sub-division was slower relative to the reduction in March This was consistent with surveys carried out by the Ministry of Agriculture & Fisheries (MOA) in April 2018 which had suggested a slower pace of decline. However, surveys by the Consumer Affairs Commission (CAC) had suggested a faster pace of decline. For May 2018, all surveys suggest continued declines for agricultural prices, albeit marginal. The quarterly change of the 12-month average trend in industrial electricity sales, used as a proxy for industrial production, was largely unchanged in April 2018 relative to the previous month (see Figure 5). Domestic agriculture commodity prices declined at a slower pace in April 2018 relative to March Figure 5: Industrial Electricity Sales The indicator of industrial productivity was largely unchanged in April April 2018 Research Services Department 4

8 Short-term Inflation Analysis and Forecast 2.3 Import prices For April 2018, oil prices rose by 5.7 per cent to average US$66.33 per bbl. This increase was mainly influenced by (i)_renewed investor optimism that a trade dispute between the US and China may be resolved as US officials softened its tone on US-China trade relations and (ii)_speculation about escalating geopolitical tensions in the Middle East. Oil prices rose in April and May For May 2018, oil prices rose by approximately 5.5 per cent to average US$69.98 per bbl. This increase was mainly influenced by (i) US President Trump s withdrawal from the 2015 Iran nuclear deal and a renewal of the highest level of sanctions against the Islamic Republic (ii) declining Venezuelan crude oil production, which has reduced by 600,000 barrels per day, and (iii) the latest monthly oil market report published by the Organization of Petroleum Exporting Countries (OPEC) which indicated an upward revision to its forecast for global oil demand in Figure 6: International Oil Prices Figure 7: International Grains Prices April 2018 Research Services Department 5

9 Short-term Inflation Analysis and Forecast For April 2018, the grains price index rose by 4.8 per cent. This outturn mainly reflected a weighted increase in the prices of hard wheat and rice by 11.3 per cent and 4.9 per cent, respectively. For May 2018, the grains price index is expected to rise by 3.3 per cent. This outturn is expected mainly to reflect a weighted increase in the prices of soft wheat and rice by 5.9 per cent and 5.3 per cent, respectively. 2.4 Trends in Core Inflation For April 2018, the monthly change in both the CPI without Agriculture & Fuel (CPI-AF) and the CPI without Food and Fuel (CPI-FF) was unchanged at 0.1 per cent, relative to the previous month. The Trimmed Mean (TRIM) accelerated to 0.1 per cent relative to -0.2 per cent in the previous month. As at April 2018, two of three annual point-to-point measures of core inflation, CPI-FF and TRIM, were unchanged relative to March The CPI-FF and TRIM were 2.3 per cent and 1.9 per cent, respectively. The CPI-AF decelerated to 2.5 per cent relative to 2.6 per cent in the previous month. Figure 8: Core Inflation (12-month change) The grains price index advanced for April 2018 and is expected to further advance in May Two of the three measures of annual core inflation were unchanged in April 2018 relative to the previous month. April 2018 Research Services Department 6

10 Short-term Inflation Analysis and Forecast 3.0 Revised Forecast Moderate inflation is expected for May The increase in the CPI for the month is forecasted to reflect advances in HWEG, and TRAN and FNB. The increase in HWEG is due to expected higher electricity costs for the month. TRAN is expected to reflect an increase in petrol prices. Downward pressure from FNB is anticipated due to expected marginal declines in non-processed food prices. Inflation in June and July 2018 is anticipated to mainly reflect increases in the costs of utilities and petrol, as well as in non-processed food prices due to an expected rebound. Inflation for FY2018/19 is forecasted to fall within the target range of 4.0 per cent to 6.0 per cent. The overall risks are skewed to the downside for the next four quarters (see Figure 9). The major downside risks include persistently lower prices of non-processed food in the agricultural sector and weaker than anticipated demand. The main upside risks to the inflation forecast are higher than anticipated international grain and oil prices and adverse weather. Headline inflation for FY2018/19 is anticipated to fall within the target range of 4.0 per cent to 6.0 per cent. Figure 9: Monthly Inflation Fan Chart April 2018 Research Services Department 7

11 Short-term Inflation Analysis and Forecast 3.0 Summary and Conclusion For April 2018, there was a deflation of 0.4 per cent as declines in Housing, Water, Electricity and Gas (HWEG) was partly offset by higher prices for petrol and its related products. Moderate inflation is expected in May 2018, mainly reflecting anticipated increases in HWEG and moderate price increases in vegetables and starchy foods as well as transport costs. Inflation in June 2018 is anticipated to mainly reflect increases in the costs of utilities, petrol and the prices of non-processed food. For fiscal year 2018/19, inflation is expected to remain towards the lower end of the forecast range for the next three quarters before converging towards the midpoint of the forecast range. April 2018 Research Services Department 8

12 Short-term Inflation Analysis and Forecast Appendices Figure 10: Trends in Selected Agriculture Production April 2018 Research Services Department 9

13 Short-term Inflation Analysis and Forecast April 2018 Research Services Department 10

14 Table 1A JAMAICA: HEADLINE INFLATION RATES Apr / 3 Month Monthly 3 mth* 3mth# 12 Month* 12 Month# FYTD CYTD C.P.I AVG. C.P.I % change % change % change % change % change % change % change Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr / December 2006 = 100 * Point to Point # Moving average Source: STATIN April 2018 Research Services 11

15 Table 1B JAMAICA: CPI WITHOUT FOOD AND FUEL Apr / 3 Month Monthly 3 mth* 3mth# 12 Month* 12 Month# FYTD CYTD CPI-FF Avg.CPIFF % change % change % change % change % change % change % change Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr /January 2000 = 100 * Point to Point # Moving average Source: BOJ April 2018 Research Services 12

16 Table 1C JAMAICA: CPI WITHOUT AGRICULTURE AND FUEL Apr / 3 Month Monthly 3 mth* 3mth# 12 Month* 12 Month# FYTD CYTD CPI-AF Avg.CPIAF % change % change % change % change % change % change % change Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr /January 2000 = 100 * Point to Point # Moving average Source: BOJ April 2018 Research Services 13

17 Table 1D JAMAICA: CPI WITHOUT FUEL Apr / 3 Month Monthly 3 mth* 3mth# 12 Month* 12 Month# FYTD CYTD CPI-F Avg.CPIF % change % change % change % change % change % change % change Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr /January 2000 = 100 * Point to Point # Moving average Source: BOJ April 2018 Research Services 14

18 Table 2 Regional Inflation Apr-MTH GKMA OUC RA Inflation(%) Inflation(%) Inflation(%) 01 FOOD & NON-ALCOHOLIC BEVERAGES Food Bread and Cereals Meat Fish and Seafood Milk, Cheese and Eggs Oils and Fats Fruit Vegetables and Starchy Foods Vegetables Starchy Foods Sugar, Jam, Honey, Chocolate and Confectionery Food Products n.e.c Non-Alcoholic Beverages Coffee, Tea and Cocoa Mineral Waters, Soft Drinks, Fruit and Vegetable Juices ALCOHOLIC BEVERAGES & TOBACCO CLOTHING & FOOTWEAR Clothing Footwear HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS Rentals for Housing Maintenance and Repair of Dwelling Water Supply and Miscellaneous Services Related to the Dwelling Electricity, Gas and Other Fuels FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE HOUSEHOLD MAINTENANC Furniture and Furnishings (inc. Floor Coverings) Household Textiles Household Appliances Glassware, Tableware and Household Utensils Tools and Equipment for House and Garden Goods and Services for Routine Household Maintenance HEALTH Medical Products, Appliances and Equipment Health Services TRANSPORT COMMUNICATION RECREATION & CULTURE EDUCATION RESTAURANTS & ACCOMMODATION SERVICES MISCELLANEOUS GOODS & SERVICES ALL DIVISIONS April 2018 Research Services 15

19 Table 3A Component Contribution to Inflation Apr Weight in Monthly Weighted % Contrib'n the CPI Inflation(%) Inflation to Inflation 01 FOOD & NON-ALCOHOLIC BEVERAGES Food Bread and Cereals Meat Fish and Seafood Milk, Cheese and Eggs Oils and Fats Fruit Vegetables and Starchy Foods Vegetables Starchy Foods Sugar, Jam, Honey, Chocolate and Confectionery Food Products n.e.c Non-Alcoholic Beverages Coffee, Tea and Cocoa Mineral Waters, Soft Drinks, Fruit and Vegetable Juices ALCOHOLIC BEVERAGES & TOBACCO CLOTHING & FOOTWEAR Clothing Footwear HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS Rentals for Housing Maintenance and Repair of Dwelling Water Supply and Miscellaneous Services Related to the Dwelling Electricity, Gas and Other Fuels FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE HOUSEHOLD MAINTE Furniture and Furnishings (inc. Floor Coverings) Household Textiles Household Appliances Glassware, Tableware and Household Utensils Tools and Equipment for House and Garden Goods and Services for Routine Household Maintenance HEALTH Medical Products, Appliances and Equipment Health Services TRANSPORT COMMUNICATION RECREATION & CULTURE EDUCATION RESTAURANTS & ACCOMMODATION SERVICES MISCELLANEOUS GOODS & SERVICES ALL DIVISIONS April 2018 Research Services 16

20 Table 3B Inflation Comparison Apr-MTH & 2018 Weight in the CPI MTH MTH 01 FOOD & NON-ALCOHOLIC BEVERAGES Food Bread and Cereals Meat Fish and Seafood Milk, Cheese and Eggs Oils and Fats Fruit Vegetables and Starchy Foods Vegetables Starchy Foods Sugar, Jam, Honey, Chocolate and Confectionery Food Products n.e.c Non-Alcoholic Beverages Coffee, Tea and Cocoa Mineral Waters, Soft Drinks, Fruit and Vegetable Juices ALCOHOLIC BEVERAGES & TOBACCO CLOTHING & FOOTWEAR Clothing Footwear HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS Rentals for Housing Maintenance and Repair of Dwelling Water Supply and Miscellaneous Services Related to the Dwelling Electricity, Gas and Other Fuels FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE HOUSEHOLD MAINTENA Furniture and Furnishings (inc. Floor Coverings) Household Textiles Household Appliances Glassware, Tableware and Household Utensils Tools and Equipment for House and Garden Goods and Services for Routine Household Maintenance HEALTH Medical Products, Appliances and Equipment Health Services TRANSPORT COMMUNICATION RECREATION & CULTURE EDUCATION RESTAURANTS & ACCOMMODATION SERVICES MISCELLANEOUS GOODS & SERVICES ALL DIVISIONS April 2018 Research Services 17

21 Table 4A CYTD Component Contribution to Inflation Jan-Apr Weight in CYTD Weighted % Contrib'n the CPI Inflation(%) Inflation to Inflation 01 FOOD & NON-ALCOHOLIC BEVERAGES Food Bread and Cereals Meat Fish and Seafood Milk, Cheese and Eggs Oils and Fats Fruit Vegetables and Starchy Foods Vegetables Starchy Foods Sugar, Jam, Honey, Chocolate and Confectionery Food Products n.e.c Non-Alcoholic Beverages Coffee, Tea and Cocoa Mineral Waters, Soft Drinks, Fruit and Vegetable Juices ALCOHOLIC BEVERAGES & TOBACCO CLOTHING & FOOTWEAR Clothing Footwear HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS Rentals for Housing Maintenance and Repair of Dwelling Water Supply and Miscellaneous Services Related to the Dwelling Electricity, Gas and Other Fuels FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE HOUSEHOLD MAINTE Furniture and Furnishings (inc. Floor Coverings) Household Textiles Household Appliances Glassware, Tableware and Household Utensils Tools and Equipment for House and Garden Goods and Services for Routine Household Maintenance HEALTH Medical Products, Appliances and Equipment Health Services TRANSPORT COMMUNICATION RECREATION & CULTURE EDUCATION RESTAURANTS & ACCOMMODATION SERVICES MISCELLANEOUS GOODS & SERVICES ALL DIVISIONS April 2018 Research Services 18

22 Table 4B CYTD Inflation Comparison Jan-Apr & 2018 Weight in the CPI CYTD CYTD 01 FOOD & NON-ALCOHOLIC BEVERAGES Food Bread and Cereals Meat Fish and Seafood Milk, Cheese and Eggs Oils and Fats Fruit Vegetables and Starchy Foods Vegetables Starchy Foods Sugar, Jam, Honey, Chocolate and Confectionery Food Products n.e.c Non-Alcoholic Beverages Coffee, Tea and Cocoa Mineral Waters, Soft Drinks, Fruit and Vegetable Juices ALCOHOLIC BEVERAGES & TOBACCO CLOTHING & FOOTWEAR Clothing Footwear HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS Rentals for Housing Maintenance and Repair of Dwelling Water Supply and Miscellaneous Services Related to the Dwelling Electricity, Gas and Other Fuels FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE HOUSEHOLD MAINTENA Furniture and Furnishings (inc. Floor Coverings) Household Textiles Household Appliances Glassware, Tableware and Household Utensils Tools and Equipment for House and Garden Goods and Services for Routine Household Maintenance HEALTH Medical Products, Appliances and Equipment Health Services TRANSPORT COMMUNICATION RECREATION & CULTURE EDUCATION RESTAURANTS & ACCOMMODATION SERVICES MISCELLANEOUS GOODS & SERVICES ALL DIVISIONS April 2018 Research Services 19

23 Table 5A FYTD Component Contribution to Inflation Apr-Apr Weight in FYTD Weighted % Contrib'n the CPI Inflation(%) Inflation to Inflation 01 FOOD & NON-ALCOHOLIC BEVERAGES Food Bread and Cereals Meat Fish and Seafood Milk, Cheese and Eggs Oils and Fats Fruit Vegetables and Starchy Foods Vegetables Starchy Foods Sugar, Jam, Honey, Chocolate and Confectionery Food Products n.e.c Non-Alcoholic Beverages Coffee, Tea and Cocoa Mineral Waters, Soft Drinks, Fruit and Vegetable Juices ALCOHOLIC BEVERAGES & TOBACCO CLOTHING & FOOTWEAR Clothing Footwear HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS Rentals for Housing Maintenance and Repair of Dwelling Water Supply and Miscellaneous Services Related to the Dwelling Electricity, Gas and Other Fuels FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE HOUSEHOLD MAINTE Furniture and Furnishings (inc. Floor Coverings) Household Textiles Household Appliances Glassware, Tableware and Household Utensils Tools and Equipment for House and Garden Goods and Services for Routine Household Maintenance HEALTH Medical Products, Appliances and Equipment Health Services TRANSPORT COMMUNICATION RECREATION & CULTURE EDUCATION RESTAURANTS & ACCOMMODATION SERVICES MISCELLANEOUS GOODS & SERVICES ALL DIVISIONS April 2018 Research Services 20

24 Table 5B FYTD Inflation Comparison Apr-Apr & 2018 Weight in the CPI FYTD FYTD 01 FOOD & NON-ALCOHOLIC BEVERAGES Food Bread and Cereals Meat Fish and Seafood Milk, Cheese and Eggs Oils and Fats Fruit Vegetables and Starchy Foods Vegetables Starchy Foods Sugar, Jam, Honey, Chocolate and Confectionery Food Products n.e.c Non-Alcoholic Beverages Coffee, Tea and Cocoa Mineral Waters, Soft Drinks, Fruit and Vegetable Juices ALCOHOLIC BEVERAGES & TOBACCO CLOTHING & FOOTWEAR Clothing Footwear HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS Rentals for Housing Maintenance and Repair of Dwelling Water Supply and Miscellaneous Services Related to the Dwelling Electricity, Gas and Other Fuels FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE HOUSEHOLD MAINTENA Furniture and Furnishings (inc. Floor Coverings) Household Textiles Household Appliances Glassware, Tableware and Household Utensils Tools and Equipment for House and Garden Goods and Services for Routine Household Maintenance HEALTH Medical Products, Appliances and Equipment Health Services TRANSPORT COMMUNICATION RECREATION & CULTURE EDUCATION RESTAURANTS & ACCOMMODATION SERVICES MISCELLANEOUS GOODS & SERVICES ALL DIVISIONS April 2018 Research Services 21

25 Table 6 Annual Component Contribution to Inflation Apr Weight in Annual Weighted % Contrib'n the CPI Inflation(%) Inflation to Inflation 01 FOOD & NON-ALCOHOLIC BEVERAGES Food Bread and Cereals Meat Fish and Seafood Milk, Cheese and Eggs Oils and Fats Fruit Vegetables and Starchy Foods Vegetables Starchy Foods Sugar, Jam, Honey, Chocolate and Confectionery Food Products n.e.c Non-Alcoholic Beverages Coffee, Tea and Cocoa Mineral Waters, Soft Drinks, Fruit and Vegetable Juices ALCOHOLIC BEVERAGES & TOBACCO CLOTHING & FOOTWEAR Clothing Footwear HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS Rentals for Housing Maintenance and Repair of Dwelling Water Supply and Miscellaneous Services Related to the Dwelling Electricity, Gas and Other Fuels FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE HOUSEHOLD MAINTEN Furniture and Furnishings (inc. Floor Coverings) Household Textiles Household Appliances Glassware, Tableware and Household Utensils Tools and Equipment for House and Garden Goods and Services for Routine Household Maintenance HEALTH Medical Products, Appliances and Equipment Health Services TRANSPORT COMMUNICATION RECREATION & CULTURE EDUCATION RESTAURANTS & ACCOMMODATION SERVICES MISCELLANEOUS GOODS & SERVICES ALL DIVISIONS April 2018 Research Services 22