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Published on March 4, 2008

The Consumer Price Index (CPI) surged 5.4 per cent year on year last month, the highest in 20 months, since June 2006.

Commerce Ministry deputy permanent secretary Pairoa Sudsawarng yesterday said the high inflation rate derived from skyrocketing prices in the food and beverage sector, which expanded 7.9 per cent. Non-food items increased 4 per cent, mainly from oil prices.

However, the CPI increased only 0.7 per cent last month from January.

Despite high inflation last month, the ministry insists inflation will not exceed 3.5 per cent this year, even though the two-month average inflation was 4.8 per cent.

The ministry will closely monitor the situation in the first half of the year and then consider whether to revise the annual target, said Pairoa.

Although oil prices will rise gradually and force some consumer prices to increase in the remaining months, the ministry said the baht's strengthening would soften the high inflation rate this year.

"Cancellation of the 30-per-cent capital-control measure would also result in a higher baht value, while oil prices should not be as high as in the previous years," Pairoa said.

Previously, the ministry had expected the average Dubai oil price to be US$85 (Bt2,700) per barrel, but now the price has reached $92.53 a barrel.

The ministry is also optimistic that inflation will not jump significantly next month, thanks to many food and consumer-goods manufacturers decreasing their selling prices in response to the government's plan, said Internal Trade Department deputy director-general Vatcharee Vimooktayon.

For instance, powered-milk manufacturers agreed to lower prices 5-13 per cent starting this month. Manufacturers of shampoo, detergent, soap and dishwashing liquid this week will also submit their plans for freezing and decreasing prices to the ministry.

Last month, food and beverage prices rose 7.9 per cent, due mainly to prices of meat rising 25 per cent, vegetables and fruits 15.1 per cent and eggs and dairy products 10.7 per cent.

Prices in non-food sectors rose 4 per cent last month, resulting from a fuel-price rise of 27.1 per cent, with public-transportation fares increasing 2.2 per cent and the price of alcohol and cigarettes 3.7 per cent.

Core inflation, which excludes volatile food and fuel prices, last month increased 1.5 per cent year on year and 0.3 per cent from January.

Meanwhile, the Commerce Ministry reported the Construction Price Index jumped a significant 14.3 per cent year on year last month, mainly from rises in costs of steel and paint products.

Petchanet Pratruangkrai

The Nation