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Thailand: September inflation lower than August on fresh food
The headline inflation rate, gauged by the increase in the consumer price index (CPI), rose for a 15th straight month in September year-on-year, but slowed from August, mainly because of lower fresh food prices.
The Commerce Ministry reported yesterday consumer prices rose 1.33% from September last year after rising 1.62% year-on-year in August, the highest since October 2014, driven by rising prices for energy and fresh food.
Pimchanok Vonkorpon, director-general of the Trade Policy and Strategy Office, said the fresh food prices, particularly for vegetables and fruit, dropped significantly last month, bringing down the overall consumer prices.
She said lower prices were a result of excessive supply and are expected to stand temporarily.
Of the 422 product and service items used to gauge inflation, the prices of 221 items such as milled rice, cigarettes, powdered milk and instant coffee rose last month. No price changes were registered for 84 items, while 117, including pork, vegetable oil and toothpaste, saw prices drop.
On a monthly basis, prices rose 0.29% from August, boosted by rising rice and flour prices which rose 4.48%, seasoning prices, up 1.98%, and non-alcohol drink prices, up 1.88%.
For the first nine months, inflation averaged 1.14% over the same period last year, which moved in line with the Commerce Ministry’s forecast at 0.8-1.6%.
Core CPI, which excludes raw food and energy prices, rose 0.8% year-on-year in September and 0.14% month-on-month from August. For the first nine months, core inflation averaged 0.72%.
Ms Pimchanok said Thai inflation is expected to accelerate in the fourth quarter, driven by oil and the weakening baht.
Inflationary pressure mellowed over this period, she said.
“In the last quarter of the year, energy prices are expected to gradually rise at some particular swing, while domestic consumption is likely to remain stable, with promising confidence,” said Ms Pimchanok.
The office yesterday raised the inflation forecast to averaged 1.25% this year from 1.2% projected earlier.
The forecast was made under the assumption the country’s GDP will grow 4.2-4.7%, with crude oil prices averaging US$68-73 per barrel, up from the previous forecast of $60-70 per barrel, an exchange rate of 32-34 baht per dollar, and export growth of more than 8%.
The office expects Thai exports to grow at 9% this year.
Ms Pimchanok said the baht is likely to depreciate in the following months of this year, following the upward trend of global interest rates, which could affect the net balance of payments.
Moreover, farmer incomes and average wages have shown significant signs of growing at higher rates than CPI inflation.
She said the office is closely watching for the impact of the Federal Reserve’s interest rate hike, which may affect capital flow, weaken the baht, and put more pressure for other countries to increase interest rates in pursuit.
Thanavath Phonvichai, vice-president for research of the University of Thai Chamber of Commerce, said given core inflation in September, purchasing power in Thailand remain fragile and clustered.
Concerns about higher oil prices causing higher production and transport costs might lead people to spend less, he said.
Annual headline inflation is expected to average at 1.1% year-on-year this year, but monitoring is warranted on the movement of global crude prices, given expectations that prices will climb above $80 per barrel, said Siam Commercial Bank’s Economic Intelligence Unit (EIC).
A rise in global crude prices is derived from how US sanctions on imports of Iranian crude oil are expected to be more swift and severe than previously projected, said the EIC.
“[We] view that there is a possibility that headline inflation could rise from above expectations if oil prices remain at [$80 per barrel] or rise further,” said the think tank.
“However, the potential that fresh food prices will be pressured by an oversupply is a negative factor [keeping a lid on rising] headline inflation.”
Core inflation is anticipated at 0.7% year-on-year this year on the back of a continued recovery in private consumption and investments, said the EIC.
Acceleration in core inflation warrants a close watch whether or not the trend is sustainable, if the rise is attributed mainly to processed food, said the EIC.
Source: https://www.bangkokpost.com/business/news/1550338/september-inflation-lower-than-august-on-fresh-food