Oil Price Drives Thai Inflation To 7-year High

[george]

Rising oil price drives Thailand's inflation to 7-year high

BANGKOK: -- Thailand's inflation rate rose to a 7-year high of 5.6 percent year-on-year in August, due to climbing prices of oil, food and drink and consumer products, announced Commerce Ministry.

The higher figure prompted the ministry to revise its forecast for all-year inflation rate to 4-4.2 percent from the original estimation of 3.8-4.2 percent.

"The average inflation rate hit 3.8 percent over the past 8 months and is expected to top 4 percent in the rest of the year," newspaper Nation Friday quoted Karun Kittisataporn, permanent secretary of commerce, as saying.

The new forecasts were based on Dubai crude oil prices averaging 50 US dollars to 52 dollars a barrel for the year, said Karun.

Dubai oil futures Thursday were traded at around 60 dollars in Singapore.

With the global oil prices climbing, Thailand has also witnessed core consumer price index rising 2.3 percent in August year-on-year.

The consumer price index of food and beverages also rose 1.3 percent in August from July, driven by price hikes in chicken, fish and fishery products, vegetables, fruit, finished food and non-alcoholic beverages.

The Bank of Thailand is now expected to raise its interest rates above the inflation rate, though it has raised interest rates six times since August 2004.

The central bank raised its 2005 average inflation forecast to 4-4.5 percent in late July from the 3-4 percent it projected in April.

--Agencies 2005-08-04

[cclub75]

With the global oil prices climbing, Thailand has also witnessed core consumer price index rising 2.3 percent in August year-on-year.

<{POST_SNAPBACK}>

And it's only the begining...

Yes the core inflation rises.... and that will hurt bad.

Two problems :

-many businesses that believed that oil price will come down. So they restrained themself to increase their prices for many months. Wishfull thinking of course. Now they start to understand that... well...high oil prices are here to stay.

-many businesses that understood that long time ago, but in front of high competition, tried their best to keep their prices.

But they can no longer afford their shrinking margins.

Both are going to increase their prices suddendly. It will be like a barrage that breaks.

And another point : inflation mesurement is based on a "index" based itself on a "basket of products".

In France, the basket contains for instance electronic devices such a computer.

Price of computers decrease in "real price" and PC increase in power. Therefore for Insee (the french agency who take care about the statistics) the "price" of this item decrease a lot (much more than its "real" price, because for 500 euros in 2005 you will have a more powerfull PC than a PC bought 500 euros in 2004), which of course has a great impact on the index.

It's possible to critizise this methodology...

All i want to say is that : we have to distinguish between "statistical inflation", result of calculation on an index, and "real inflation" (felt by common people).

Edited September 4, 2005 by cclub75

[astral]

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