Consumer prices fell for the 13th straight month in January as local fuel and farm product prices remained weak.
The Commerce Ministry reported yesterday consumer prices, based on 450 products and services, dropped 0.53% year-on-year last month, improving from a 0.85% year-on-year decline in December and a 0.97% decline in November.
Month-on-month, January headline consumer prices dipped 0.26% against 0.39% in December and 0.32% in November. Core inflation, which excludes volatile food and energy prices, rose 0.59% year-on-year last month against 0.68% in December, with the monthly rate edging up 0.07% from December.
Consumer prices contracted 0.9% in 2015 from the year before, the first drop in six years since the subprime crisis of 2009, when the country's inflation rate contracted by 0.9%. Core inflation edged up last year by 1.05% from a year before.
Continued price declines were largely related to the fall in global crude oil prices, which resulted in lower prices for oil-related products and crops.
Somkiat Triratpan, director of the Commerce Ministry's Office of Trade Policy and Strategy, said consumer prices were likely to continue falling the next two months as oil prices had substantially dropped. He expects consumer prices will start edging up in the second quarter as oil prices recover.
"Oil prices are now considered a major factor dictating the country's inflation direction," he said. "Drought conditions may put pressure on food prices."
The ministry expects inflation will rise to 1-2% this year in line with an economic recovery. The projection is based on economic growth of 3-4%, a Dubai crude oil price of US$45-54 a barrel and a foreign exchange rate of 35-36 baht against the greenback.
Thanavath Phonvichai, vice-president for research at the University of the Thai Chamber of Commerce, said the continued dip in headline inflation reflected technical deflation. But positive core inflation shows product prices are still increasing while consumer purchasing power exists.
The low inflation rate is expected to lead the central bank to keep interest rates low at its next meeting in order to stimulate the flagging economy, he said.
Mr Thanavath predicts headline inflation will stay in negative territory in the first quarter but possibly increase in the second quarter.