by Marlon Madden
Barbadians are being cautioned not to expect any decrease in commodity prices until sometime next year, even if globally the rate of inflation starts to fall.
This caution comes from noted economist Jeremy Stephen who told Today’s BUSINESS in a recent interview that he expected oil prices to continue to rise in the coming months, fuelling the rise in commodity prices.
There has been an increase in international fuel costs this year, compared to a year ago, and economists have reasoned that higher energy costs are driving up the prices of just about every other good.
Moreover, a slowdown in the supply chain, said to be brought on by logistics issues, has also been blamed for the rising cost of basic food items.
Giving an assessment of the current situation, Stephen said the logistics issues were creating an “artificial scarcity”, which was contributing to the rising prices of goods.
Stephen added he was pleased that the Fair Trading Commission (FTC) has been “helpful” to Barbadians by not granting a price increase to the electric utility company recently, but said his biggest worry was that oil prices would continue to rise.
“Oil prices should go up,” he said. “Given global trends recently in terms
of bungled logistics – the arguments are that logistically, things are taking longer to get where they need to get so there is this artificial scarcity, and any time there is the word scarcity one should expect a bump in prices. So that would reflect in the price of oil,” he explained.
Against this background, he cautioned that Barbadians should not be surprised by price increases as they do their Christmas shopping, pointing out that since around July, prices in the US have been going up and some supermarkets have been reporting shortages of some items including some fruits and vegetables.
“So, one can expect, although we source our fruits differently . . . it will be a little more difficult to acquire those things. So, prices of those things will go up; prices of certain meats should go up; prices of toiletries, I expect, should have by now been increasing,” said Stephen.
The rate of inflation has also been moving upwards in recent times, with the Central Bank reporting last month that the 12-month moving average inflation rate was estimated at
1.5 per cent as at May 2021.
The Retail Price Index from the Barbados Statistical Service for September showed that Barbadians were paying more for food, non-alcoholic beverages, oil, housing, electricity, water, gas and other fuel between August and September.
Pinnacle Feeds recently announced that prices could go up by an average 3.7 per cent. This comes months after Government’s three-month, $2 million support to the island’s main feed supplier ended in August. This means farmers of poultry and other meat products will also put on a markup.
Pointing out that an increase in inflation in the US would also mean an increase in local prices, Stephen explained: “The US just, in general, went through its greatest month of inflation ever – 6.2 per cent in the last 30 years. When the US catches a cold, we end up sneezing in the islands. So, you would expect, particularly when it comes to foodstuff, that the prices of those things will go up.”
He said if manufacturing powerhouse China, the US, the UK, and other major manufacturers see an increase in hiring and were able to sustain that employment then price increases should slow.
Highlighting the impact of the ongoing COVID-19 pandemic as a factor in the logistics challenges, Stephen said, “As hiring picks up in those industries globally the rate of inflation would fall. I don’t think prices ever go back to what people perceive as normal, so it just means that the rate of increase will slow.”
Stephen, who spoke with Today’s BUSINESS last month, said the increase in commodity prices locally would depend on merchants and when they sourced their items.
“For the Christmas holiday it depends on the merchants. I know the merchants make their last import for the Christmas rush all like now (mid-November). So, if by early December you don’t see a marked increase in prices then things should hold until early in the new year,” he said.
“But definitely by January/February my hope is that globally the logistics challenge, which is based on artificial scarcity, can be fixed once companies begin to ramp up hiring in manufacturing industries globally. It is based on companies willing to hire people because again, we have an artificial scarcity of goods. Goods are still there, they are just not moving,” explained Stephen.
In its January to June report, the Central Bank had pointed out that some of the lower prices on non-food items which include clothing, household furnishing and transportation costs, could be linked to “increased discounting by businesses as they adapted to the COVID-19 environment”.
marlonmadden@barbadostoday.bb
