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Inflation drops to low for year
3.9% October CPI due to lower food, fuel cost
Bangkok Post – 4 November 2008
PHUSADEE ARUNMAS
Inflation fell to a year-low of 3.9% in October thanks to declines in fuel, food and consumer prices, the Commerce Ministry announced yesterday.
The latest figures were welcomed by investors, with Thai shares jumping 7.84% on optimism that domestic interest rates can move lower due to lower inflationary pressure.
The consumer price index rose 3.9% year-on-year in October, and declined 1.2% compared with the previous month. The index reached a 10-year high of 9.2% year-on-year in July, but has since declined steadily.
Siripol Yodmuangcharoen, the ministry's permanent secretary, said that officials had cut the 2008 inflation forecast to a range of 5.9% to 6.3%, down from earlier forecasts of 6.5% to 6.9%.
Inflation through the first 10 months of the year averaged 6.3%, with fuel prices up 27.7% from the same period last year and the food and beverage index up 10.9%.
Commodities prices have fallen sharply in recent weeks as a result of the global economic crisis.
The Commerce Ministry said food and beverage prices fell 0.2% in October compared with the previous month, with key staples such as rice, fruits and vegetables all down.
Non-food prices dropped even more dramatically at 1.9% in October compared with the previous month, thanks largely to a 12.1% decline in domestic fuel prices and a 0.4% fall in transport costs.
Core inflation, which excludes food and energy prices, rose 2.4% in October from the year before and 0.1% from the previous month. Over the first 10 months, core inflation averaged 2.4%, well within the range of zero to 3.5% set by the Bank of Thailand.
Most analysts expect the central bank's Monetary Policy Committee to cut interest rates in light of the recent decline in inflation when it meets on Dec 3 for the last scheduled meeting of the year.
The MPC's one-day policy rate currently stands at 3.75%.
Mr Siripol said the decline in oil prices and the government's six-point anti-inflation programme had helped bring prices down in recent months.
Crude oil prices have fallen from a peak of nearly $150 per barrel in July to around $65 now as energy demand is expected to decline with the global economic slowdown.
Mr Siripol said core inflation for 2008 was now projected at between 2.2% and 2.7%, down from earlier forecasts of 3-3.5%, assuming oil prices average $60-65 for the year and the baht stabilises at 34-35 to the US dollar.
''For 2009, inflation will depend on oil prices and currency rates. But we are quite optimistic that inflation will fall further next year,'' he said.
The producer price index, which covers 506 products compared with 374 for the CPI, stood at 153.7 points in October, up 8.5% year-on-year but down 6.5% from the previous month. The PPI fell for the third straight month in October, with declines seen in both manufactured and agricultural goods.
Agricultural products fell 8.8% in October from the previous month, led by declines in white rice paddy prices, rubber and livestock. Prices for crude oil, natural gas, ores and other mining products fell 9% for the month, while manufactured goods dropped 5.9%.
For the first 10 months of the year, the PPI rose 14.9% from the same period last year.
Somphob Manarungsan, an economist at Chulalongkorn University, said the latest data confirmed that inflationary pressure had declined across the entire economy in line with global trends.
''Still, if you consider 6.9% over the first 10 months and the target of 5.9% to 6.3% for the year, inflation is still relatively high when compared with policy interest rates,'' he said. ''But the declines in October should increase the opportunity for interest rates to fall.''
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