News Room - Business/Economics

Posted on 03 Mar 2010

Inflation climbs to 3.7% in February

Inflation rose for the fifth straight month in February as food and non-food prices increased, signalling the country is recovering from a year-long economic recession.

 

The country's annual consumer price index, which tracks 417 products and services, rose 3.7% last month year-on-year, but slowed after it surged to a 16-month high of 4.1% in January, as the prices of some products eased.

 

Food prices, notably for rice, flour and cereal products, meats, dairy products, vegetables and fruits increased 5.1% year-on-year and non-food sector items rose 2.9%.

 

However, the prices of certain sectors such as apparel and footwear, and recreation and education dropped by 3.3% and 10.4% respectively compared with the same period last year.

 

Monthly inflation returned to positive numbers for a second consecutive month to 0.56% from 0.6% in January and against -0.1% in December last year.

 

The core inflation index, which excludes volatile energy and food costs, rose by 0.3% year-on-year in February, with the monthly figure increasing 0.02% from January primarily due to higher vehicle costs, alcoholic beverages and personal care expenditures.

 

"Our economy is getting back to normal," said Yanyong Phuangrach, permanent secretary at the Commerce Ministry. "Still, there are some risks that need close monitoring such as political strife, volatile oil prices and a labour shortage."

 

Average inflation in the first two months of this year stood at 3.9%, with the first-quarter figure estimated at 3.7%.

 

The ministry is maintaining its forecast that inflation will average between 3% and 3.5% this year. The forecast is based on assumptions that Dubai crude oil will be $70 to $80 per barrel and the baht will trade at 31 to 33 per dollar.

 

The Commerce Ministry will try to control product prices for three months to help mitigate the risk of inflation, said Mr Yanyong.

 

The ministry also pledged to control the approval of price increases for some of the main consumer products in Thailand, including sugar and cooking oil.

 

The producer price index (PPI), covering 506 products, also increased for the fifth straight month in February to 159.6, up by 11.8% from the same period last year. The PPI increased 1.1% from December.

 

Somphob Manarungsan, an economist at Chulalongkorn University, said the price rise in February, which had only 28 days, remained relatively high after a 4.1% rate in January when people were celebrating New Year festivities by buying gifts, and oil prices were $10 higher than the $70 per barrel in February.

 

Deputy governor Bandid Nijathaworn said inflationary pressures had yet to be strong enough to prompt the Bank of Thailand to revise its monetary policy or policy interest rate. However, he noted the central bank would need to monitor the situation closely.

 

"Rising inflation is what the central bank has already expected, as it compares with last year's low base. In addition, the prices of food sector increase due to higher farm product prices, pushing accordingly up inflation."