inflation fall in august brings relief

Last month's 6.4-per-cent inflation rate represented the first drop after four consecutive months of rises and a decade high in July, the Commerce Ministry announced yesterday.

Despite lower inflation last month, the ministry is predicting higher full-year inflation of 6.5-6.9 per cent, up from an earlier forecast of 5-5.5 per cent. The adjustment is based on a change in the average baht exchange rate from 33 to the US dollar to 34 and an increase in the average oil price to US$113 (Bt3,900) per barrel, from $105 a barrel before.

The Consumer Price Index (CPI) showed inflation rising 6.4 per cent year on year last month but prices declining 3 per cent from July.

Inflation rose 6.7 per cent year on year in the first eight months.

The ministry said the improved year-on-year rate was due mainly to the six government measures aimed at curbing consumers' cost of living.

"It's the first decline after four consecutive months of increases, because of government and ministry attempts to curb rising costs of consumer-goods prices," said Commerce permanent secretary Siripol Yodmuangcharoen.

The price of fuel has been the main inflation trigger this year, accounting for 12.6 per cent of the CPI. Decreasing oil prices in the world market and the six government measures should help keep inflation on target, he said.

Food and beverage prices increased a sharp 14.3 per cent year on year last month, mainly for flour, fresh fruits and vegetable, meat and seasonings. But prices increased only a slight 1.7 per cent from July.

Prices outside of the food and beverage sector increased 1.4 per cent year on year in August. However, there was a sharp fall of 6.2 per cent from July, due mainly to decreases in prices for water and public transportation and the excise tax for gasohol and diesel.

Siripol said increasing costs for public transportation and the Expressway should raise inflation 0.19 per cent this month.

Meanwhile, core inflation increased 2.7 per cent year on year last month but decreased 0.9 per cent from July. Core inflation in the first eight months was up 2.4 per cent year on year.

The ministry also reported it would modernise the system it used to calculate inflation by adding liquefied petroleum gas (LPG) to its weighted lists, thus raising the number of products listed to 374 items next year.

Amara Sriphayak, senior director at the Bank of Thailand's Monetary Policy Group, said falling inflation was a result of the government's six economic measures and the central bank's raising of the policy interest rate.