Inflation continued to run above four percent for the fourth straight month driven by a rising rental sector, according to the latest figures released by Government.

The Consumer Price Index (CPI) by the Department of Statistics revealed that the inflation rate hit 4.4 percent during June, down slightly from 4.7 percent the previous month, despite a 0.3 percent increase in the cost of goods and services, but up on the first three months of this year.

Retail sales growth slowed to 1.2 percent in June 2008, compared to a three-percent rise in the previous year, as consumers began to feel the pinch from spiralling fuel prices and food costs, with consumer spending estimated at $99.6 million.

After adjusting for the annual retail sales rate of inflation, measured at 5.4 percent in June, the volume of retails sales fell by four percent, reflecting the fourth month of drops in sales activity for the first half of 2008.

The CPI showed that inflation increased by four percent in June 2007, while the rent sector was the largest contributor to the 12-month rise, as it advanced 2.5 percent on average in the same period this year.

Prices for controlled properties rose 4.2 percent year-over-year, with properties not subject to rent control edging up 1.2 percent, while overall the rent sector climbed 0.1 percent, largely attributed to the 0.3 percent increase in rent-controlled properties as home owners continued to make improvements to their housing stock.

The fuel and power, and food sectors also strongly impacted on the increase in the annual inflation rate, up 22.4 percent and 4.9 percent respectively. Fuel and power advanced 0.4 percent in June, directly linked to a 7.2 percent rise in the price of a cylinder of propane gas.

Food prices also jumped 1.5 percent during June, with bread (four percent), baby food (3.5 percent) and frozen dinners (2.9 percent) all among the key contributors.

Other highlights of the CPI included the transport and vehicle sector, which dipped 0.5 percent, as price gains were offset by a 2.1-percent decrease in the average cost of foreign travel.

Tobacco and liquor climbed 0.4 percent, reflecting increases in the average cost of beer (0.3 percent), wine (0.5 percent) and spirits (1.1 percent), while health and personal care edged up 0.4 percent in June in response to higher prices for services such as ladies hairstyling (2.3 percent) and everyday toiletries (1.3 percent). The household goods, services and communications sector increased 0.5 percent for the month, attributed mainly to a 7.7-percent rise in the cost of elderly resident care, with household supply products also up 0.8 percent.

As far as retail sales were concerned, service station outlets, motor vehicles dealers and food stores proved to be the biggest drivers.

Service stations reported a 12.2-percent gain in gasoline sales for the month of June, bringing the average increase over the first six months of 2008 to 10.8 percent, in contrast to the 1.5-percent average decline in sales during the first half of 2007. Allied to this was a 23.6-percent jump in the cost of premium and mixed fuel.

Despite rising prices and tighter budgets, sales of motor vehicles rose 9.8 percent in June, only the second month of growth this year, due to increased sales of more popular models.

A five-percent rise in food prices during the month translated into a two percent increase in sales - the lowest gain since April 2007, suggesting consumers were taking home lighter or less bags of groceries but were paying more.

Sales of building materials fell 5.9 percent in June 2008, highlighting the cyclical nature of the construction industry, with growth having been recorded at 12.1 percent for the corresponding period the previous year, and pointing to an erosion in consumers' purchasing power.

All other stores, including furniture, pharmaceutical, electronic and gift retailers experienced a 1.7 percent decline in sales, mainly due to a 2.5-percent drop in tourist arrivals having a knock-on effect on tourist-related stores.

Overseas spending, however, was up, with residents returning to the Island declaring goods valued at $5.1 million during June this year, $500,000 higher than the year prior, accounting for 4.9 percent of total retail sales.