CPI rises for a third consecutive month

CPI rises for a third consecutive month

The consumer price index (CPI), a gauge of headline inflation, rose for a third straight month in June, but at a slower pace from the previous two months.

The Commerce Ministry reported yesterday that inflation was 1.25% in June after tallying 2.44% in May and 3.41% in April, the first uptick since March 2020 and the highest jump in eight years, led by higher oil and food prices as well as the end of government subsidies on utility bills.

On a monthly basis, the CPI dropped by 0.38% from May.

Core CPI, which excludes raw food and energy prices, rose 0.52% in June after a 0.49% year-on-year rise in May.

For the first six months this year, average headline inflation was 0.89% year-on-year and core inflation 0.27%.

Wichanun Niwatjinda, deputy director-general of the Trade Policy and Strategy Office, said rising oil prices were the main cause of rising CPI in June.

Moreover, the price of certain agricultural products such as pork, eggs, fresh fruits, and vegetable oil have increased.

However, government measures to reduce utility bills and the declining price of some fresh foods such as rice and fresh vegetables were factors that decelerated the inflation rate. Other prices were quite stable and moved in line with current production and demand amid the Covid-19 pandemic.

Of the 430 product and service items used to gauge inflation, 226 items such as fuel, water supply, vegetable oil, pork, rambutan, grilled chicken, and eggs saw a price increase. Meanwhile, 135 items saw a decline in price, including electricity bills, white and sticky rice, fresh chilli, shallots, onion, fresh chilli, and pumpkins. A total of 69 items saw their price unchanged.

According to Mr Wichanun, besides supply factors like energy and fresh food prices, demand factors were likely to encourage consumption as indicated by an increase in products related to exports and imports such as food products, electronic appliances, computers, and electronics in line with the expansion of related economic indicators such as the producer price index, value-added tax revenue from imports, and sales of commercial vehicles and motorcycles. Moreover, farmers' income continues to expand in line with agricultural prices, he said.

According to Mr Wichanun, annual inflation in 2021 is projected to stay between 0.7-1.7% (with an average of 1.2%) based on GDP growth of 1.5-2.5%, a Dubai crude oil average of US$60-70 (1,927 baht-2,248 baht) a barrel, and an exchange rate of 30-32 baht per dollar.

"Inflation is expected to stay at 2.13% in the third quarter and 2.37% in the fourth quarter driven by high energy prices and the recovering global economy," Mr Wichanun said. "This will be a factor that causes inflation for the rest of the year to continue to expand. However, the outbreak of Covid-19 could limit economic activities, affecting overall income and consumption."

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