OPINION – Price signals

The statistical department compiles two series of consumer price indices. One represents the typical consumption of residents’ families (Consumer Price Index, CPI); the other, goods associated with our visitor’s consumption (Tourist Price Index, TPI). Some of the categories used in each index are similar; others are naturally different. After all, tourists’ profile consumption is naturally distinct from the residents. Note that CPI is estimated monthly, while TPI figures are published quarterly. 

In both cases, the data for the entire 2021 are available. CPI indicates an increase in prices at about 0.03 per cent – virtually nil. TPI points to a decrease in prices of about 4.7 per cent.

As 2020 was also an out-of-the-ordinary year, that comparison may be less meaningful than would be the case in more ‘normal’ years. However, if we compare the price indices for 2021 with the corresponding ones in 2019, the changes become more noticeable. In that period, tourist prices dropped by 12.5 per cent, while consumer prices went up by a still minor number, just below one per cent.

Either way, these results suggest that concerns about inflation, touching other parts of the world, do not seem to be justified here. Setting aside concerns about the adequacy of the ‘baskets’ used in their computation, a more detailed look may raise questions not apparent in the overall indices. Being weighted averages, they may hide considerable variations in specific categories. 

For instance, the changes over 2019 for food, health, and education, are the highest among the various categories used in the computation of CPI. They rose neatly above the average, with figures ranging from 3.6 per cent for food, 4.4 per cent for education, and 5.6 for health. In the crisis context, these are not trivial figures. Their impact in the index is mainly hidden by the drop in clothing prices, the most ‘deflationary’ category. It dropped by more than 10 per cent in the last two years. 

Such kind of divergence is more pronounced in the case of TPI. The point here is that if we take aside the heavily weighted items “Accommodation” and “Clothing,” the picture changes. Other prices are holding or even rising. Given the significant loss of tourists and the resulting drop in overall demand, these results appear slightly counter-intuitive. Part of the explanation may be that consumption patterns are changing. Also, it may signal price pressures are building up elsewhere. Or, maybe, the index is up for technical review.