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Published on January 21, 2008

National Legislative Assembly member Somchai Sakulsurarat is confused. A small bag of soybean milk purchased near his home today costs Bt6, or Bt1 more than it did yesterday.

This is small change in baht terms, but still a 20-per-cent hike. A one-dish meal costs Somchai Bt30. It used to be Bt25, another 20-per-cent jump.

"It's kind of confusing to me," Somchai said. "The government tells us inflation will run between 3 per cent and 5.5 per cent this year, but the cost of my food and other essential products has risen by 20 per cent to 25 per cent."

Bekenglong Asawako-witwong sees the same thing. Breakfasting at a food stall near Suan Lum, his rough calculation is that things are 20 per cent more expensive than on a similar morning last year.

Charging up for the day at the same stall is businessman Namchai Kobkuekul. These days he is ordering fewer dishes to go with his steamed rice. A meal today costs nearly Bt100.

"Food prices don't show a big rise from last year. But combined with the cost of other necessities, the cost of living has risen 10 per cent," Namchai said. This is in stark contrast to the Commerce Ministry's forecast of 3.5 per cent.

One reason for the ministry's low inflation estimate is that it plans to add some items to the basket of goods used to calculate inflation and some of these new items are price controlled.

This will automatically maintain, or even lower, the consumer price index when other prices increase. For instance, biodiesel and gasohol will be priority additions to the CPI.

At present the basket includes 373 product categories.

Many products that are controlled have, in fact, had their prices unilaterally, and without permission, hiked by sellers.

This is why consumers are shouldering more rapidly rising costs of living than the government is telling us.

And worse: it seems consumers expect further significant rises throughout the rest of the year.

"Of course, many expenses are expected to continue rising because many elements necessary for manufacturing show no sign of stabilising in cost - particularly oil, which is a core expense for everything. However, right now, I'm able to accept the situation," Namchai said.

Like other consumers, Namchai said he was careful about what he spent, but did not worry too much, because he has saved well in the past and so has a cushion.

He is spending less on expensive food and dining out, but spending more on necessities and middle-of-the road goods and services.

He is still willing to shell out for daily meals as long as the quality is good.

The groups of consumers Namchai worries about are middle- and low-income earners.

Low-income earners are feeling the effects of inflation significantly, and it is hurting their savings. "Let's look. All expenses keep increasing but revenue is still the same."

Namchai manages to keep saving by spending less on items like food. He now prefers to spend around Bt25 a dish. But, many restaurants are charging as much as Bt50 for a single plate.

He slashes unnecessary expenses, too.

While consumers are having trouble with rising costs, businesses are in no better shape. Many have pared margins to the bone, and yet others are making losses.

"I have had to bear unimpressive business performance since early last year," said Sataphorn Techadechworaphan, the owner of Pou Thiem Heng meat noodles. "My monthly revenue was able to cover expenses in some months, but there were many where I had to accept a loss. If it weren't for retained earnings, my business would have gone under a long time ago." He has kiosks at food courts in four shopping malls - Emporium, MBK, Siam Square and Platinum.

"Operational costs have been increasing steadily since early last year. Increases in fuel prices are the heaviest burden. It costs a lot, because I need to send raw materials to all the branches everyday. At the same time, prices of other raw materials such as sugar, vegetables and raw noodles also keep increasing," he added.

A milk shop that also sells traditional Chinese bread at Suan Lum is experiencing the same difficulties. It has seen profits dive as much as 25 per cent to almost zero in as many months.

"Prices of some raw materials have increased so much that I was shocked. For example, cooking gas has increased from Bt240 to Bt295 a 15-litre cylinder. Flour has increased from Bt575 to almost Bt800 per 22 kilograms between October last year and now. Butter increased from Bt600 to Bt780. Baking powder increased from Bt250 to Bt350. Straws and plastic bottles have increased, too. As a whole, our costs have gone up 25 per cent, which is a long way from what the government is telling us," said Sirinart Phitaksoonthornchart, daughter of the shop's owner.

A Shanghai fish-ball maker with kiosks in The Mall's four branches, Emporium and Central Rama II, has witnessed hikes in the cost of its main ingredient fish, plus sugar and other raw materials. A boiled-rice seller at Suan Lum is dealing with soya-bean oil at Bt46 a bottle, as well as other ingredient increases. Then there is fuel.

Many, obviously, want to hike prices to maintain margins, and save their businesses from going to the wall. This will, in turn, increase the cost of living for customers.

But, it is not easy to increase prices at the same rate as input costs are rising.

Some cannot increase their prices at all because they consider customers to be friends, while others do not want to loose competitiveness.

Meanwhile, food vendors in shopping complexes have another problem. The volume of customers has fallen at these locations by as much as 50 per cent.

They are handling this another way - keeping prices steady but reducing the amount of food customers get per serving.

Today, consumers are experiencing rising costs of living, and have little confidence in the economy. Businesses have to shoulder rapid cost increases, and are selling less.

Government economic policy is the key to a better outlook. But, both consumers and businesses see little hope for an improvement anytime this year.

 "I can only hope the economy will get better and consumer confidence will recover because, at least, we already have new government," Sataporn of Pou Thiem Heng said.

Having a new government does not boost confidence very much. But many try to look on the bright side. "I hope the new administration can settle down very soon," said Bekenglong.

Nitida Asawanipont

The Nation