Inflation slows again

Concerns grow over weakening economy

Inflation slowed for a seventh straight month in July due to an erosion of consumer purchasing power, prompting worries over clearer signs of a faltering economy.

Commerce Ministry figures showed inflation based on 450 consumer items rose by 2% year-on-year last month, slowing from 2.25% in June, 2.3% in May and 2.4% in April as well as from 3.6% last December, when the rate was its highest since November 2011.

On a month-to-month basis, prices rose by 0.1% from June.

Benjarong Suwankiri, a first vice-president of TMB Analytics, TMB Bank's research unit, said continued easing of inflation would be worrisome.

This would represent weakness in the country's economy and lower spending by consumers, he said.

However, low inflation is good in that it gives the government more room to formulate new economic stimuli through both monetary and fiscal policy, Mr Benjarong added.

In the first seven months of this year, consumer prices were up by 2.6% year-on-year, indicating relatively low inflationary pressure.

Vatchari Vimooktayon, the commerce permanent secretary, credited the easing inflation mainly to domestic prices of fresh food, particularly vegetables, fruits and eggs, returning to normal thanks to better weather. Prices of meat and energy also increased moderately, but many products such as personal care items saw their prices drop thanks to more sales promotions.

Mrs Vatchari said government measures and subsidies aimed at easing the cost of living also played a part in holding down prices.

Core inflation, which excludes fresh food and fuel prices and is based on 312 products and services, rose by 0.85% year-on-year in July, with the rate for the first seven months standing at 1.18%, within the central bank's target range of 0.5% to 3%.

Monthly core inflation was unchanged last month from June.

"The overall inflation outlook indicates a continued decline, possibly dipping below 3% this year," said Mrs Vatchari, adding that the ministry may revise down the inflation target this month to between 2.8% and 3.4%.

If inflation stands at less than 3% at year-end, it would be the lowest rate in four years after 3.02% last year, 3.81% in 2011 and 3.3% in 2010.

Mrs Vatchari said easing inflation is also in line with current conditions in the global economy, for which many have anticipated a slowdown this year.

Previously, the private sector has voiced concerns about the slowdown in domestic consumption as the country will have to rely mainly on domestic demand in light of global uncertainty.

The private sector also urged the government to consider new measures to spur purchasing power, but Finance Minister Kittiratt Na-Ranong said such measures were not needed.

About the author

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Writer: Phusadee Arunmas
Position: Business Reporter