Jump to content

Inflation At 18-month High


george

Recommended Posts

Inflation at 18-month high

BANGKOK: -- Inflation in January was at its highest level in 18 months, at 4.3 per cent year on year.

This was mainly due to the increase in consumer goods prices, which drove prices up around the globe.

However, Commerce permanent secretary Siripol Yodmuangcharoen insisted yesterday that inflation for the whole year would not exceed 3.5 per cent, a target based on the Dubai oil price of US$85 (Bt2,638) a barrel and the exchange rate of 33-33.50 per US dollar.

"Headline inflation in January created some difficulty for us because it implied that prices of many goods are increasing. The ministry will try to curb the consumer burden by allowing only necessary goods prices to adjust," Siripol said.

As oil prices have escalated globally, Thailand is not alone in suffering from higher costs.

Analysts had predicted that annual January inflation in the eurozone would remain at the 3.1 per cent it recorded for December. That is the highest level since the launch of the euro and overshot the European Central Bank's 2-per-cent target limit.

China's consumer price index is likely to go up 6.5 per cent for the month, against 3.93 per cent in India. The Reserve Bank of India has raised interest rates nine times since 2004 to keep prices in check. While holding key rates steady on Thursday, the central bank said the risk of higher inflation had increased.

South Korea's January inflation rate also rose to a 39-month high at 3.9 per cent compared to 3.6 per cent in December and the target of 2.5-3.5 per cent.

Thailand is in a unique position. While the prices of food items rise, the central bank cannot lift interest rates as that would widen the spread of US and local rates and attract further capital inflows. Such inflows would pressure the baht to strengthen against the US dollar, hurting exporters.

Commerce Ministry data showed that January's inflation rose mainly because of higher food and beverages prices, up 4.8 per cent year on year. The price of non-food items increased 3.9 per cent.

Inflation is expected to rise further as manufacturers of products in 11 categories wait for ministry approval to lift prices.

Siripol said the ministry was considering putting more products on price control lists to cushion the consumer burden. So far, it has 35 products on its control lists, which are subject to ceiling-price measures.

The deputy director-general of the Internal Trade Department, Vatcharee Vimooktayon, said the department was considering placing two or three essential products on its price control lists. Some goods would also be subject to a ceiling control. Currently only sugar is in this category.

Rising food and beverage prices resulted in the last few months from higher vegetable and fruit prices, up by 9.6 per cent, meat and poultry by 11.2 per cent, and seasoning by 8.4 per cent. The excise hike for alcohol took effect last month and slightly boosted the month's inflation figure.

Prices of non-food sectors rose 3.9 per cent last month, the result of a 28-per-cent fuel price increase, a 2.3-per-cent rise in public transportation fares, and a 3-per-cent hike in the price of alcohol and cigarettes.

However, the Consumer Price Index in January increased by only 0.8 per cent compared with December - mainly due to prices in the food and beverage sectors rising by 1.6 per cent, and non-food items by 0.2 per cent.

Prices of building and communications equipment softened last month.

Core inflation, excluding volatile food and fuel prices, increased 1.2 per cent from the same period last year, and was up 0.1 per cent from December.

-- The Nation, Agencies 2008-02-02

Link to comment
Share on other sites

A more realistic way of commenting would have been for the Commerce spokesman to have said: "Only if oil goes down to BT2,638 per barrel and the exchange rate stays in the range 33.00 to 33.50 will the rate of inflation get down to 3.5%".

The oil price may go down, but it will only do so as a result of a nasty depression reducing China's and America's purchases of oil.

In which case there is likely to be also a flight from the US$ (now being called 'the Bernanke peso') and the baht may be one of the currencies sought, so pushing up its strength.

IMO, the only certainty for the foreseeable future is levels of volatility hitherto unknown. So comments or forecasts like this one about the next year's inflation for Thailand should not be considered as having much reliability.

In fact, for some things (stock prices, for example) deflation may occur more often than inflation during the next year.

Link to comment
Share on other sites

A more realistic way of commenting would have been for the Commerce spokesman to have said: "Only if oil goes down to BT2,638 per barrel and the exchange rate stays in the range 33.00 to 33.50 will the rate of inflation get down to 3.5%".

The oil price may go down, but it will only do so as a result of a nasty depression reducing China's and America's purchases of oil.

In which case there is likely to be also a flight from the US$ (now being called 'the Bernanke peso') and the baht may be one of the currencies sought, so pushing up its strength.

IMO, the only certainty for the foreseeable future is levels of volatility hitherto unknown. So comments or forecasts like this one about the next year's inflation for Thailand should not be considered as having much reliability.

In fact, for some things (stock prices, for example) deflation may occur more often than inflation during the next year.

That's a high inflation rate really. I mean UK is panicing about 2.1%. :o Agreed ifs and buts about oil and exchange rate. Sometimes a currency just gets singled out for pos. or neg. attention, such is the case with the bt. Thailand appears to have weak fundamentals.

Link to comment
Share on other sites

They have been keeping a tight lid on prices across the board for over two years now. I have talked with a couple of major food processors that have dramatically scaled back production and are importing raw materials. Imagine importing food which is also grown in Thailand because its cheaper to ship in than buy locally. They will either distort the pricing structure into severe shortages or release it all at once like a too tightly wound spring. Either plan could present "challenges" but no one has ever successfully forced an economy into prosperity through price controls. This could be interesting in 2008.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Recently Browsing   0 members

    • No registered users viewing this page.


  • Topics

  • Latest posts...

    1. 1

      Racism or "just" bad behavior at Pattaya City Hospital?

    2. 1

      Racism or "just" bad behavior at Pattaya City Hospital?

    3. 1

      A Radical Experiment: How Elon Musk Could Shake Up Washington

    4. 0

      The Guardian Steps Back from Elon Musk’s Platform X Amid Content Concerns

    5. 0

      Metropolitan Police Chief Warns of Drastic Budget Cuts Under Labour

    6. 0

      Labour’s Business Backlash: How Tax Hikes and Policy Shifts Are Straining Corporate Ties

  • Popular in The Pub


×
×
  • Create New...