Inflation index used to calculate wage increases up by 5.7% in April

Consumer prices increased by 5.7% in April as measured by the index on which the annual cost of living wage increase is determined, figures out on Tuesday show.

The Retail Price Index (RPI) published by the National Statistics Office shows that annual inflation in April increased by more than a percentage point over the previous month.

The main drivers behind the April increase were house maintenance costs and food.

Housing prices increased by a whopping 15.1% on the back of higher costs for materials and services used in maintenance when compared to April last year. This was followed by food, which increased by 9.2%.

Contrary to what is happening in Europe, the prices for electricity and water in Malta have registered no increase as a result of government’s intervention to cushion the impact.

Inflation was already on the rise towards the end of last year as higher demand from the post-COVID recovery was hampered by supply chain problems. However, the Russian invasion of Ukraine in February caused turmoil to global energy and food markets.

The 12-month moving average rate, which helps overcome seasonality issues that impact the annual and monthly inflation rates, in April stood at 2.9%.

The RPI confirms the findings from last week of the Harmonised Index of Consumer Prices, which is a slightly different measurement, that showed inflation continuing its upward trend.

The RPI is used for the computation of the COLA and adjustments in wages and rents. 

Economist Philip von Brockdorff has anticipated that wages could increase by more than €6 per week next year if the cost of living continues the upward trend seen so far.

“If things continue as they are, the cost of living adjustment (COLA) in the next budget could be more than €6,” he said last week during a discussion on TVM News Plus’ Xtra.

Von Brockdorff said that the wage increase could render some sectors of the economy less competitive but this was mitigated by the government’s heavy intervention to maintain energy prices stable.

Keeping energy prices stable helped remove uncertainty, he said, adding however, that if energy prices continue increasing it will be difficult for government to maintain the same level of support.

READ ALSO: COLA wage increase could hit €6 next year if prices continue same upward trend