Rise in food prices sees inflation reach new highs in December 2021

Inflation in Malta continued to rise in December, reaching an annual rate of 2.59 per cent, with increasing food prices taking their toll on most people’s cost of living.

The 12-month moving average for December meanwhile stood at 1.5 per cent.

The highest annual inflation rates in December 2021 were registered in food (4.94 per cent) and other goods and services (3.56 per cent). On the other hand, the lowest annual inflation rates were registered in water, electricity, gas and fuels (0.00 per cent) and clothing and footwear (0.58 per cent).

Likewise, food price had the largest impact by far on annual inflation. The below chart depicts the impacts on the annual inflation rate by the 10 main groups, with the impact being 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.

In December 2021, the largest upward impact on annual inflation was registered in the food index (+1.06 percentage points), largely due to higher prices of vegetables. The second and third largest impacts were measured in the transport and communication index (+0.28 percentage points) and the other goods and services index (+0.26 percentage points), mainly on account of higher prices of motor vehicles and pet food respectively.

On the other hand, no downward impacts on annual inflation were registered for the month of December.

In December, the food index registered the highest annual inflation rate of 4.94 per cent, of which food excluding restaurant services and take-aways registered an annual rate of 5.24 per cent and restaurant services and take-aways registered an annual rate of 4.14 per cent.

About the Retail Price Index

The Retail Price Index measures monthly price changes in the cost of purchasing a representative basket of consumer goods and services, and is closely linked with the Cost-of-Living Adjustment (COLA) increases and periodic rent payment adjustments.

The RPI figures released by the National Statistics Office include three different measures of inflation.

The annual inflation rate measures average price changes between the reference month and the same month of the previous year. Although responsive to recent changes in price levels, this measure can be influenced by one-off effects in either month

The monthly inflation rate compares price changes between the reference month and the previous month. This measure can be highly influenced by seasonal effects.

The 12-month moving average rate overcomes the volatility of the above two rates by comparing the average of the latest 12 indices to the average of the previous 12 indices. This measure is less sensitive to temporary changes in prices. Thus, this rate is used for the computation of the COLA and adjustments in wages, rents, etc.