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Slashed mobile rates led to deflation

Friday, August 17, 2012

The steep drop in mobile phone call prices has resulted in deflation in the month of July.

The consumer price index, which reflects a basket of goods representing Jamaican consumption patterns, declined by 0.3 per cent last month.

"Contributing significantly to the downward movement was the 41.6 per cent decline in the index for the division 'communication', as the cost of mobile telephone call rates fell," said the Statistical Institute of Jamaica (Statin).

In a move to recapture market share in the mobile phone sector, which coincided with a decision by the Office of Utilities Regulations (OUR) to lower termination rates, LIME cut its headline rates from $8 a minute to $2.99.

Digicel responded a week later with its own $2.89 a minute plan.

There was also a 1.4 per cent decline in the index for 'housing, water, electricity, gas and other fuels', due to reductions in both the cost of water and electricity rates. Those rates declined as a result of a reduction in the price adjustment mechanism for water rates and a decline in the cost of electricity, on lower fuel charges to customers.

All other divisions showed price increases, excepting for education, which remained flat in July.

The July deflation was the lowest inflation rate recorded since February 2011, when there was 0.4 per cent deflation.

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