Last month, the year-on-year inflation rate was 1.9 per cent. This was higher than April's 1.8 per cent, due to a jump in oil and food prices.

Inflation in the first five months was 2.2 per cent compared to the same period last year.

"Given rising oil prices, inflation is likely to start rising again in the fourth quarter," Karun Kittisataporn, the ministry's permanent secretary, told reporters yesterday.

But Karun said the ministry would maintain its inflation estimate at 1.5 to 2.5 per cent for this year.

He said the economic situation would become more stable as a result of greater consumer confidence and lower interest rates.

"All economic indicators show that the country can enjoy sustainable economic growth. The impact from the Bank of Thailand's decision to cut its policy interest rate will soon lead to an increase in domestic consumption, which will drive economic growth," he said.

Karun said that a rising inflation rate reflected increasing domestic consumption, while a lower rate indicated stronger economic fundamentals.

Last year inflation peaked at 5.9 per cent in the first five months, due mainly to rocketing oil prices.

Factors that caused last month's increase included rising prices of oil and food, particularly fresh food.

Prices for food and beverages rose one per cent last month from April, with the price of vegetables rising 10.8 per cent because of early floods. Milk and dairy products also rose in price.

Prices for goods in the non-food and beverage categories increased 0.5 per cent from April, mainly as a consequence of a 3.8-per-cent increase in fuel costs.

The core year-on-year inflation rate last month was 0.7 per cent, unchanged from April. Core inflation in the first five months was 1.3 per cent.

Meanwhile, the ministry reported that the production price index increased by 1.9 per cent from April because of rising costs of raw materials in all sectors.

Prices of raw materials in the agricultural sector rose 8.8 per cent last month.

Petchanet Pratruangkrai

The Nation