Food inflation - an example of government success?

A Trinidad Guardian article ("Food prices inch up", 29 Mar 2010) prompted me to go to the Central Bank T&T website (click on the Data link) for some raw price index data.  I discovered something interesting, but can't fully explain it.  Maybe you can help.

Food prices are considered to be the main inflationary driver for the past few years.  I downloaded the data - the Central Bank (CBTT) has data from Jan 2003 onwards - and plotted a chart showing two things:

• Annual Change in Food Retail Price (base = same month previous year)
• Monthly Change in Food Retail Price (base = previous month).

In other words, the red line shows the change in the food price index for a particular month compared to the same month in the previous year (year-on-year change).  The blue line shows the change in the food price index for a particular month compared to the immediately preceding month (month-on-month change).  I wanted to see how monthly food inflation changed over the years from year-on-year and month-on-month perspectives.  The Microsoft Excel file is attached below (if you can't open it, and use Windows XP/Vista/7, go to the Microsoft Office 2010 Beta website - you can download the full suite and use for free until Oct 2010).

From the chart, we can see the following:

• Food prices increased the most, year-on-year, in the month of Sep 2008 (34.6%)
• However, since then, there is a quite noticeable slide downwards in the rate of change of annual food price inflation.

So I wonder if someone can help me determine possible reasons for this.  When did the government mega-farms start production?  Was it external factors, e.g. wheat prices?  Does it co-incide with the slide in oil prices from the giddy heights of 2008?  Was there some increase in local farming from Aug/Sep 2008?  VAT changes?  Duty changes?  Were salaries also increasing at a reducing rate?  I would've loved to compare these trends to salary data in T&T but, unlike the UK's Office of National Statistics, I couldn't find salary data on the CBTT's website.

If we look at the raw data in the tables, you'd realise that the basket of items you bought in the grocery in Jan 2010 is just over three times the price of the same basket bought in Jan 2003, but has been dropping/stable in absolute terms since it peaked in Sep 2009 (index = 323.5).  Is your salary today three times what you earned in Jan 2003?  If not, then, at least for food, you're not winning.

I wanted to test the CBTT's view in the article that the increase in prices for Feb 2010 - which hasn't made it to the Bank's website yet for downloading - is possibly linked to the ongoing drought.  I wanted to see what the level and direction of changes were for the months of Jan, Feb and Mar each year.  In the Excel spreadsheet, fiddle with the filter at the top of the Date column to select specific months.  The red line data for Jan, Feb and Mar each year shows that the year-on-year changes were normally double-digit - except for this year.  However, I suspect any changes due to the drought would probably be better expressed in the blue month-on-month trend line.  From the Jan, Feb and Mar figures for month-on-month change, the change from Dec to Jan is usually negative; however, for the first time since 2004, prices went up by over 1% in Jan 2010.  So maybe there is some link to the drought - there is a distinct difference this year compared to previous years that can't be explained by the occurrence of Lent.

If it floats your boat, have a go at the other indices.  See if the data supports public statements by the various parties as we enter the campaign trail.  For example, if someone says their policies have left you better off today than you've ever been, but your salary hasn't been rising in line with food prices since 2003, you may want to challenge them.  Also, if anyone tries to tell you food prices have fallen, teach them the difference between falling inflation and falling prices.