Headline inflation in May hits 13-year high

Headline inflation in May hits 13-year high

Core CPI increased 2.28% year-on-year

Thailand's headline inflation, gauged by the consumer price index (CPI), hit a 13-year high in May, largely attributed to the rise in energy and food prices.

The Trade Policy and Strategy Office reported yesterday headline inflation rose 7.1% in May year-on-year, accelerating from 4.7% in April.

Ronnarong Phoolpipat, director-general of the Trade Policy and Strategy Office, said the increase was in line with rising inflation in other countries, especially among advanced economies such as the US and the EU member states. He said major contributions included increasing demand following the economic recovery, tight supply, along with trade and economic sanctions against Russia, all of which combined to cause a supply-demand imbalance.

According to Mr Ronnarong, energy prices surged by 37.2% year-on-year in May owing to the rise of global oil prices, the end of the subsidy on cooking gas, and the rise of the fuel tariff (Ft) value. The low price base last year also contributed to current inflation.

However, prices of certain items such as rice, clothes, residential rent and tuition fees continued to drop.

According to the ministry, the CPI rose on a monthly basis by 1.4% from April, following an increase in almost all product groups, especially energy, fresh fruits, meats, seasoning and condiments as well as personal care.

The core CPI, which excludes raw food and energy prices, rose 2.28% year-on-year in May, up from 2% in April.

In the first five months of 2022, headline inflation rose 5.19% from the corresponding period of 2021, with core inflation increasing 1.72%.

The Producer Price Index in May 2022 rose 13.3% from May 2021, increasing in all product groups, especially manufacturing and mining products including petroleum, natural gas and other related products. The contributions were the high cost of energy, logistics, imported materials and production, along with the baht's depreciation.

Demand remained high in both domestic and world markets. The Construction Materials Price Index also rose 6.5% from May last year following a slower growth in several product groups such as iron products, concrete, and electrical and plumbing. Meanwhile, production costs were still high as a result of the prices of raw materials (oil, steel, coal and aluminium).

The Consumer Confidence Index stood at 44.7 in May, decreasing from 45.7 in the previous month. The main factor was that the country's economy was affected by external factors, high commodity prices, the end of certain government measures as well as the ongoing Covid-19 situation. However, an expansion in tourism and exports would support confidence in the future.

Mr Ronnarong said inflation this month should continue to expand because energy prices remain high compared with last year. This is attributed to a higher price cap on diesel, a gradual increase in cooking gas prices through June 2022, and the rise of the Ft value, he said. Moreover, the prices of consumer goods, especially fresh foods and prepared foods, rose due to high production costs.

Logistics costs, export restrictions in several countries, and improving demand from tourism and exports should contribute significantly to inflation, said Mr Ronnarong. The projection for inflation for 2022 is 4.0-5.0% (a median of 4.5%), in line with the current situation, he said. If there were any significant changes, the figure would be revised again, he said.

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