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Published on February 1, 2008

Starting this month, shoppers will have to spend more on consumer goods after the Commerce Ministry removes some price controls and allows manufacturers to increase retail prices to cope with higher production costs.

The ministry's stringent price-control measures have brought not only positive results but also some negative outcomes.

For instance, they were aimed at alleviating people's high cost of living and curbing inflation, but they have also forced some goods off the shelves.

So far more than 60 companies in 14 categories of goods have sought the ministry's permission to increase retail prices.

The ministry has recently approved increases for some products, including palm oil, soybean oil and steel. It is waiting for the new commerce minister to approve price increases for more goods.

Siripol Yodmuangcharoen, the Commerce permanent secretary, said yesterday that more products would soon be approved for price rises. These are vegetable oil, diary products such as powered milk, condensed milk, pasteurised and UHT milk, wheat flour, fertiliser and batteries.

"The ministry has to approve price increases for some goods soon to reduce the impact on consumers such as supply shortages, while decreasing burdens on manufacturers," said Siripol.

The ministry is concerned about increased costs of living of consumers, but has to allow some price increases because manufacturers are also suffering from the escalating price of raw materials, he said.

The ministry has controlled the prices of essential goods for three years to keep inflation at a reasonable level and limit the cost of living.

Siripol suggested consumers carefully consider what they are buying. For instance, they could use lard or other vegetable oil, which is cheaper than palm oil or soybean oil.

The rising cost of consumer goods has also put pressure on the inflation rate. A senior Commerce Ministry source said inflation was up significantly in January compared to the same period a year ago, when it was 3 per cent.

The ministry will today announce the official inflation rate for January.

According to the ministry's report, price rises in various categories have different effects on inflation. For instance, a 1-per-cent increase in the price of vegetable oil affects inflation by 0.38 per cent, powered milk by 0.43 per cent and wheat flour by 0.01 per cent.

Increased prices for prepared food and ready-to-eat food hit inflation the hardest, as they account for 17.71 per in the calculations, followed by rental rates at 16.74 per cent.

Although rising prices of some consumer goods will cause higher inflation, the ministry still maintains its inflation prediction of 3-3.5 per cent this year, thanks to the baht's strength and the forecast decrease in oil

prices.

The ministry's prediction is based on an average oil price of US$85 (Bt2,800) per barrel and an exchange rate of 33-33.50 per US dollar. In January, the average oil price was $87, but it was down to $84 a barrel by the end of the month.

The ministry also has a worst-case scenario in which inflation is 3.5-4 per cent. The case is based on an average oil price exceeding $85 and the baht weakening to 34-35 per dollar.

Petchanet Pratruangkrai

 The Nation