Consumer goods prices in September 2011 fell over-month (MoM) for the first time in a year due to subsiding global oil prices and Thai government's measures to control energy prices, thus helping soften inflation, and countering higher food prices that have been lifted by flooding.
In details, September consumer goods prices dropping by 0.33 percent MoM resulted in the lowest Headline Inflation in six months at 4.03 percent YoY, down from the level of 4.29 percent YoY in August. However, Core Inflation increased to 2.92 percent YoY in September, a new high in three years, against the level of 2.85 percent YoY in August.
Regarding the outlook for inflation over the remainder of 2011, KResearch estimates that inflation pressure may remain high. Volatile food prices and the effects of the new rice pledging program should play a great role in raising inflation amid flooding nationwide. In addition, consumer goods prices will rise gradually in upcoming months. However, the cost of living relief initiatives, i.e., free bus and train services and LPG/NGV price controls for the transportation sector until January 2012, and global economic risks may help decelerate inflation pressure somewhat.
KResearch views our 2011 inflation forecast including a Headline Inflation estimate of 3.7-4.0 percent and Core Inflation at about 2.3-2.6 percent will be able to accommodate the above factors.
However, inflation in 2012 may be spurred by some demand-side factors, e.g., measures to increase incomes, as well as supply-side factors amid price increases in some types of energy domestically.
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