CPI posts small drop in November

CPI posts small drop in November

The consumer price index (CPI), a gauge of headline inflation, improved for a second straight month in November, prompting the Commerce Ministry to raise its headline inflation forecast to an average of -0.87% this year from -1.1% in its April forecast.

The ministry also projected the average annual rate of headline CPI in 2021 to stay in a range of 0.7% and 1.7% (the average rate being 1.2%), buoyed by higher consumption, improved economic growth both domestically and globally, and continued government stimulus measures.

Next year's forecast was based on economic growth in Thailand of 3.5-4.5%, Dubai oil prices at an average of US$40-50 per barrel and an exchange rate of 30-32 baht per US dollar.

The Trade Policy and Strategy Office, the Commerce Ministry's planning unit, reported yesterday that CPI in November dropped 0.41% from the same month last year, improving from a 0.50% drop in October and a 0.7% fall in September.

The major contribution came from raw food, especially meats, vegetables and fruits, due to increasing demand from both domestic and foreign markets, as well as a low base price.

Energy prices still dropped, but improved from the previous month with the lowest contraction in nine months. Moreover, prices of rice and flour products declined compared with last year as they were affected by severe drought and flood in many areas. Other items moved in line with demand, supply and promotional activities.

Core inflation (all items excluding food and energy) stood at 0.18% year-on-year in November.

On a monthly basis, the CPI in November 2020 decreased 0.04% from October. For the first 11 months of 2020, the CPI was -0.90%, while core inflation stood at 0.29% for the same period.

Pimchanok Vonkorpon, the office's director-general, said the current inflation rate has been continuously improving because of government stimulus measures promoting tourism and encouraging domestic spending, which are beneficial for both consumers and producers.

The smaller dip in the inflation rate was in line with both demand and supply factors. On the demand side, she said the farm income index has been expanding following a rise in prices for agricultural products, and the sales volume of cars has improved for a second consecutive month.

On the supply side, the manufacturing production index and capacity utilisation have continuously improved for five and six consecutive months, respectively.

According to Ms Pimchanok, inflation in December 2020 is likely to improve from the previous month, referring to a deceleration in its decline. The main contributors are a gradual economic recovery, stable energy prices, the rising price of agricultural products and raw food because of higher demand in both domestic and foreign markets, and several economic stimulus measures from the government. These measures benefit consumers and producers, and create a circular flow of income that should help offset somewhat the decline in income from tourism and exports.

However, other risk factors from both domestic and foreign situations should be closely monitored, she said.

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