Inflation down for first time since February 2021

The annual inflation rate in October saw its first decline since February 2021, when the supply chain issues caused in large part by the COVID-19 pandemic first started being felt. As at October, the year-on-year rate of inflation was 7.47 per cent, down from the 7.52 per cent in September 2022, according to a new release by the National Statistics Office.

The cooling inflationary pressure was driven in large part by the reform in the bus system that resulted in the removal of almost all ticketing expenses. In fact, the transport component of the Retail Price Index (RPI, the local measure of inflation) registered at -4.44 per cent over the previous month.

Other recreational articles and services (not including sports and education-related fees and equipment) also registered a decrease of -0.45 per cent over September prices.

Practically everything else continued rising, though not always at the same rate seen previously. Rent and materials for house maintenance, for example, saw a lesser increase in October (rent: +0.3 per cent; materials: +0.27 per cent) than they did in September (rent: +1.12 per cent; materials: +1.39 per cent). So did carpets and household textiles (Sept: +1.67 per cent; Oct: +0.29 per cent) and household appliances and utensils (Sept: +2.38 per cent; Oct: +0.47 per cent).

Another notably lower increase was registered for jewellery and watches, increasing by 2.28 per cent in September but by only 0.49 per cent in October.

A decrease in prices or at least a decrease in the rate of increase does not necessarily mean that it will continue, though there are indications that the shipping crisis that caused the price of many products to spiral upwards is finally on its way to a resolution – although shipping prices remain elevated over pre-pandemic levels.

However, other items, such as food, have seen greater impact from the fall out of Russia’s invasion of Ukraine than from intercontinental shipping prices, and while the Maltese Government has fully subsidised the resulting spike in fuel and energy prices, European partners from which Malta imports much of it products have not. These higher costs of production eventually make their way to higher prices on Maltese shelves.

Returning to food, it was in fact the single most important component with the highest impact in the increase in annual inflation (+2.94 percentage points), largely due to higher prices of take-aways.

An impact is a measure showing the change in inflation as a result of the inclusion of an index. Such an impact takes into account both the weight and the annual rate of inflation by group.

The second and third largest impacts on annual inflation were measured in the housing index (+1.50 percentage points) and the transport and communication index (+0.61 percentage points), mainly on account of higher prices of house maintenance services and cars, respectively.

The highest annual inflation rates in October 2022 were registered in housing (19.02 per cent) and food (13.69 per cent). On the other hand, the lowest annual inflation rates were registered in water, electricity, gas and fuels (zero per cent) and clothing and footwear (2.48 per cent).

The 12-month moving average rate for October stood at 5.36 per cent.