The April inflation rate released recently by the Ministry of Commerce showed that our Headline Inflation was still negative for the fourth consecutive month, a YoY decrease of 0.9 percent. On a month-on-month (MoM) basis, however, the April CPI rose faster-than-expected by 1.0 percent over March. The CPI is expected to continue to rise, fueled largely by rising oil and food prices, particularly meat and vegetables.
Rising food prices are attributed to the hot weather that may wreak havoc on farm goods and hamper livestock growth. The outbreak of H1N1 Influenza A may stir up a pork scare, inducing consumers to shift from pork to other types of meat, instead, despite the Ministry of Public Health's confirmation about the safety of pork consumption. The resulting higher demand for other meat products, i.e., chicken and seafood internationally may boost these product prices domestically.
Meanwhile, energy prices have been advancing in light of positive signs emerging from advanced economies that have led to resumed investments in commodity markets. Oil and commodity prices are thus expected to increase over the remainder of this year. However, we may not see exorbitantly high prices in crude oil or commodities as we did last year because of the effect of the recession. Some recent signs of improvement globally indicate that a recovery may take time.
KASIKORN RESEARCH CENTER (KResearch) forecasts that Headline Inflation may remain deeply negative until July, due to the high base effect of last year. Headline Inflation in 1H09 may therefore contract by 1.2 percent, and remain low until the end of 3Q09. As for Core Inflation, it is expected to continue to decline over coming months, or even fall into a negative range around the middle of this year. Amid faster-than-expected price hikes as signs that the recession is bottoming out earlier than forecast, KResearch has revised upward our full-year inflation rate for 2009 to a range of 0.0-0.5 percent (from our previous projection range of -1.0 to +0.5 percent), down from the 5.5 percent rate recorded in 2008. Core inflation is projected to average 0.5-1.0 percent (compared to 0.0-1.0 percent as earlier forecast), down from 2.4 percent in 2008. All in all, both the Headline and Core CPI remain within the BOT inflation targeting range of 0.0-3.5 percent.
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