Impacts of price hikes limited

Impacts of price hikes limited

Weak spending curbs room for pass-through

Low-income earners are bracing themselves for hikes in the price of liquefied petroleum gas (LPG), electricity and Expressway tolls this month.

"Typically, such earners are more vulnerable than those earning higher wages whenever the cost of living surges," said Thammarat Kittisiripat, an assistant vice-president of TMB Bank.

The higher living costs reduce people's disposable income, adding to the burden of those caught in a debt trap.

The phased increase in the LPG price will have a greater ripple effect than will the increase in Expressway tolls and electricity since it will directly push up finished food prices, he said.

As well, the LPG hike will continue in accordance with government plans to lift the subsidy.

For several years, LPG was fixed at 18.13 baht and 21.38 baht a kilogramme for the household and transport sectors, respectively, as governments wanted to help lower consumers' burden. But as energy prices continued to increase, the Energy Policy and Planning Office decided to end the subsidy gradually and float the price to reflect real costs.

The cooking gas price began to rise by 50 satang per kg yesterday, and the increase will continue monthly at the same rate until October 2014.

By next February, the price will be the same in both sectors, at 21.38 baht. After that, the increase will continue for both sectors until the price reaches 24.82 baht in October 2014, meeting the cost of the LPG gas-separation plant.

As for Expressway tolls, the increase has not come at the best time.

Oil prices have already risen in recent months, triggered by geopolitical uncertainty over a possible US-led military attack against Syria.

Mr Thammarat said higher oil prices are another major concern, as they have a big effect on the cost of living.

Somchai Jitsuchon, director of the Thailand Development Research Institute, said the hikes in electricity bills, cooking gas and tolls will certainly push up living costs and somewhat weaken domestic consumption, which has already waned due to swelling household debt levels.

However, he doubts whether street food stalls and restaurants can fully pass on the increases in utility prices to consumers since cooked food prices have already been raised substantially since the daily minimum wage was hiked to 300 baht in April 2012.

As well, the economy has slowed down for a few quarters, making people more cautious about what they pay for.

Prayoth Benyasut, director of the Commerce Ministry's Trade and Economic Bureau, said the cooking gas price and the Expressway toll increases will hardly affect goods prices.

Based on the bureau's study of 450 consumer items used by the ministry in inflation calculation, the LPG price hike would push up consumer prices by a mere 0.01024% for the remaining four months of this year and 0.03072% for all of this year.

Meanwhile, the hike of urban Expressway tolls by at least five baht is estimated to increase consumer prices by 0.0006% and 0.007%, respectively, he said.

"The increases in the cooking gas price and Expressway tolls are nothing to worry about," said Mr Prayoth.

"What's more worrisome is the Syrian issue, as oil prices will surge if the US attacks the country. This would result in a rise in local goods prices."

The Commerce Ministry's survey has found food prices have increased for the past seven months, particularly a la carte items to 35 baht a dish at food outlets from 30 baht and to 40-45 baht at food courts at modern-trade stores from 35 baht. Prices of vegetables, eggs, poultry and pork were found to have increased seasonally.

Consumers' behaviours have also changed, as they prefer buying cooked food to preparing meals at home.

In contrast, the prices of non-food products, particularly electronic appliances, were found to have decreased significantly this year, as the government's first-time car buyer scheme, which expired at the end of last year, had drained people's disposable income, Mr Prayoth said.

Prevailing promotional and sales campaigns by retailers and modern-trade operators have also kept the lid on consumer prices.

These factors have led to a marginal increase in consumer prices this year despite a steady rise in food prices.

Deputy Commerce Minister Yanyong Phuangrach said the government is closely monitoring goods price in light of the rises of the LPG price and Expressway tolls this month.

"Overall, goods prices have yet to change much and the cost of living has not substantially increase," he said.

"Worries about the world's economy are also expected to cause manufacturers and business operators to think twice before raising their product prices."

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