Thai Inflation Surges Above 4.0%

[webfact]

Thai inflation surges above 4.0%

BANGKOK, May 2, 2011 (AFP) - Thai inflation soared above 4.0 percent in April, government data showed Monday, reinforcing expectations of more interest rate rises by the central bank to prevent the economy overheating.

The consumer price index increased 4.04 percent from a year earlier, compared with a 3.14 percent rise in March, the commerce ministry said. Month-on-month prices rose 1.38 percent as food costs increased.

Annual core inflation, which excludes volatile energy and food prices, picked up to 2.07 percent in April, although it remained within the central Bank of Thailand's target range of 0.5-3.0 percent.

The central Bank of Thailand (BoT) has raised the official cost of borrowing six times since July 2010, by a total of 1.5 percentage points to 2.75 percent, and analysts expect further tightening in an attempt to control inflation.

It said last month as it announced its latest rate increase that it was ready to take further action if needed, and its monetary policymakers are scheduled to meet again on June 1.

"The BoT will definitely keep hiking its rate," Siam Commercial Bank analyst Pornthep Jubandhu told Dow Jones Newswires.

The Thai economy returned to growth in the fourth quarter of 2010 on the back of solid exports and private consumption, snapping out of a brief technical recession.

But the rising cost of living could prove a headache for Prime Minister Abhisit Vejjajiva and his ruling coalition as they gear up for what is expected to be a tough election battle in the coming weeks.

-- (c) Copyright AFP 2011-05-03

[JohnAllan]

Governments' - not just Thailand's - inflation calculations, however technologically advanced their methods supposedly are, never, ever, seem to reflect inflation on the ground. Try wandering around the shops, and malls; visiting the hospitals; paying for services or entertainment. Then think of an inflation rate - core, note - being quoted at 4%, when you are seeing rises of 10%, 15%, 20% and more. Members of government need to consign the statistics to the dustbin of fiction, get off their collective proverbials, and get out into the real world, to see for themselves . . . . Then go back and calculate 'real' inflation . . . .

[KwaTime]

Obviously, you have some sort of sample size bias because I haven't seen large price increases with the usual exception of some things. It's not about technology for inflation calculations, it's about methodology. There is some criticism to the method, but it's better than you walking around "seeing rises of 10%, 15%, 20% and more."

[jucel]

inflation calculated these days doesn't include food and petrol (the things we notice on a daily basis and a real to us)!

Real inflation is about 10%. I still can't work out why eggs have increased by 33%. One day 10 for 30 baht, the next 10 for 40 baht. Thai people must be really hurting with this increase as eggs are an integral part of their diet. Luckily, the main staple (rice), has kept a steady price for a while now. An increase in that commodity would really get the tongues wagging

[JohnAllan]

Obviously, you have some sort of sample size bias because I haven't seen large price increases with the usual exception of some things. It's not about technology for inflation calculations, it's about methodology. There is some criticism to the method, but it's better than you walking around "seeing rises of 10%, 15%, 20% and more."

They - obviously, in this day and age - use technology in calculating the statistics. And you are evidently walking in the wrong places - or with eyes tight closed.

[mufcsamui]

Annual core inflation, which excludes volatile energy and food prices,

Surely food and energy prices are what matters most to the general public.

[rreddin]

Annual core inflation, which excludes volatile energy and food prices,

Surely food and energy prices are what matters most to the general public.

Food price inflation is a big issue. You may recall a recent announcement cutting the farm gate price of pork by about 14%, while leaving untouched the real cause of the price increase - the rising cost of animal feed. There was a similar announcement concerning the price of eggs and a moritorium on egg exports. That will cause shortages as production is cut back as farmers turn to other products. The shortages will drive up prices, fueling food price inflation.

The retail price of palm oil used for ccoking is controlled. If my memory serves me correctly, the maximum retail price is less than the cost of manufacture. The "shelf" price of this item has nearly doubled and driven up the price of other cooking oils. Many other food items have also increased in price - some by a large amount in percentage terms.

The price of rice is supported, meaning there is not a free market in that commodity. Ironically, if there was a free market, the price might actually fall.

The price of diesel fuel is subsidized - if it were not, it would cost the same a petrol, which is 50% more.

The exclusion of food and petrol/diesel fuel from the inflation calculation gives a false picture as do distortions caused by market regulation.

[gregb]

Obviously, you have some sort of sample size bias because I haven't seen large price increases with the usual exception of some things. It's not about technology for inflation calculations, it's about methodology. There is some criticism to the method, but it's better than you walking around "seeing rises of 10%, 15%, 20% and more."

I went through my credit card statements and looked at my bills from Lotus over the last 12 months. We usually buy pretty much the same thing and go every week, so the minor variations tend to average out.

My calculation showed food prices increased 9.7%.

So I have to agree...4% is underestimating the problem unless people are wealthy and spend most of their income on discretionary purposes. For the poor who are buying necessities, 10% would be much closer.