Huge leaps in inflation are affecting households across the territory

Pago Pago, AMERICAN SAMOA — “Local inflation has increased significantly in 2021,” declared the Commerce Department’s Statistics & Analysis Division in the Consumer Price Index (CPI) 4th Quarter of 2021 report released recently, which includes the second quarterly survey of selected goods and services in Manu’a for comparison with Tutuila.

The report noted that from 2017 to the end of 2020, American Samoa’s quarterly inflation increase averaged around 1.5%. However, in 2021 during the full year of lock-down due to the COVID-19 pandemic — the average quarterly inflation increased by 4.9% and is now at 9.7% at year’s end.

The report comes amid concerns among lawmakers and many consumers with the continued increase in prices of goods and services in the territory since last year and into the beginning of 2022.  Much of the concerns surfaced in November heading into December over the high cost of food items including bottled water and at the same time, the cost of gasoline hiked due to the global price increase of oil.

During his virtual testimony early this month before the U.S Senate Committee on Energy and Natural Resources, Gov. Lemanu Peleti Mauga confirmed the impact of inflation on the territory, saying that a bag of cement that used to cost $8 “is now more than $20 per cement bag”.

According to the CPI report, the Food Group is the highest expenditure category of the American Samoa Household Expenditure report registering an annual increase of 15.3% in 2021. Furthermore, Transportation group has an annual increase of 12.7% while Housing’s annual increase is 9.2%.

These three groups account for 63.4% of local household spending, according to the report, which also notes that in 2021 there was a 5.1% annual increase in Education/Communications Group; 4.8% increase in Medical Care; 3.3% in Alcoholic Beverages; 2.6% in Apparel; 2.5% in Other Goods/Services; and the lowest annual increase of 2.1% in Entertainment/Recreation Group.

The report also makes comparisons, saying that the Housing Group is the largest expenditure category of the U.S Consumer Price Index, followed by Transportation Group and Food Group. These three groups accounted for 72.8% of U.S household spending.

In a separate “CPI Newsletter” for the 4th quarter of 2021, DOC notes a “point of interest” saying that most suppliers for this quarter “expressed their concern for shipping delays and shipping costs. Some retail prices have increased due to these causes.”

Furthermore, the “cost of gas — which has also gone up — affects the cost of maintaining our source of water and electricity. With the recent influx of money from COVID-19 recovery programs, inflation is likely to continue in an upward trend.”

The CPI report also provides a summary look at the “quarterly group movements” in 2021 saying that quarter-over-quarter movement in Food registers the highest increase of 7.0% since September. Flour products, noodles, boneless beef, steaks, pork, chicken legs, turkey tails and turkey wings, cucumber, sugar, meat pie and BBQ plates went up 10 or more percent in the quarter.

The second highest quarterly increase was Transportation Group at 5.9% due to another 11% quarterly increase in the cost of fuel, automotive services/repairs and airfares.

Housing followed with a quarterly change of 5.4% because of another 16% quarterly increase in construction materials and services, electricity, rental costs and furniture.

The CPI report said that in the 4th quarter of 2021 — October to December — the highest inflation rate was recorded at 9.7% in annual cost of goods and services. Similar to national inflation, the cost of goods and services reached new heights since the COVID-19 global pandemic.

“American Samoa is no exception from global catastrophes caused by high oil prices, shipping and transportation backlogs, labor and employment shortages, international market shits and global lockdown,” the report pointed out.

Earlier in 2021, the Federal Reserve chairman Jerome Powell indicated that “we would experience higher inflation,” the report said. 

“We are now finding this to be true for the three main reasons — increased money supply, a decline in the value of the dollar and supply chain,” it says.

The report explains that inflation is most likely to occur when there is a high demand for specific goods and items, yet the supply level is low — and that millions of dollars were poured into the economy by the federal government to provide relief assistance to the people during the pandemic.

The report recalls the governor’s remarks last July at a special joint session of the Fono, where the governor announced that American Samoa will receive $1.4 billion of allocated relief and stimulus funding for the COVID-19 pandemic.

“When the money supply increases rapidly in the economy, it reduces the value of each dollar,” the report explains. “A weakening dollar raises the cost of goods especially in economies solely dependent on imports, such as American Samoa.”

Consequently, companies importing goods must pay more for the same goods. “To maintain corporate profits, companies then raise the prices of goods, leaving consumers to pay for the increases. This occurs in economies without price control,” the report said.

The Governor’s State of the Territory Comprehensive Report states that: “We have experienced some of the highest rates of inflation in recent years and as the cost of goods, fuel, and shipping rise, the effects are felt in every household.”

COSTS IN MANU’A

The report also included a summary section of the second quarterly comparison of the cost of selected goods and services purchased on Tutuila compared to the same products and services purchased by residents in Manu’a.

The first special report on Manu’a was included in the Consumer Price Index (CPI) for the third quarter — July to September — of 2021. (See Samoa News edition Nov. 8 for details.)

DOC reiterated that the objective is to identify cost differential and the magnitude of differences between Tutuila and the Manu’a island group. Eleven stores on the islands of Ta’u, Ofu and Olosega were selected and 34 commodities — including food (26 items), housing (3 items), alcohol (2 items, miscellaneous (2 items and transportation (1 item) were priced.

“Manu’a prices were about 27% higher than Tutuila’a prices by the end of 2021,” according to the report, which provides 4th quarter prices for comparison between Tutuila and the Manu’a islands.

For more information on the annual and quarterly CPI, as well as the CPI Newsletter, contact DOC’s Statistics Division at 633-0120.