The worst flood crisis in decades has not only caused substantial losses to agriculture and industry, but also impeded the transportation of goods, which has been responsible for a surge in consumer goods prices in November, particularly food and beverages. Although steep price increases were largely seen in fresh foods amid eroding purchasing power in some consumer segments, price movements are still being closely regulated by the Ministry of Commerce.
Headline Inflation rate for November was up 0.21 percent MoM, after rising 0.19 percent in October. Over-year, Headline Inflation stood at 4.19 percent, which was on a par with the rate recorded in October. The extended inundation drove up November food and beverage prices by 0.53 percent MoM, but these price increases were countered somewhat by declining fuel costs that helped push non-food and beverage prices to decline by 0.01 percent MoM. Meanwhile, November Core Inflation edged up slightly by 0.03 percent MoM, standing at 2.90 percent YoY, up slightly over the 2.89 percent rate in October.
KResearch has assessed that the impact of the deluge on expenses relating to housing and furnishing and prices of some consumer goods, e.g., foods, will gradually ease in coming months as the floodwaters recede. With the “Ft” rate (electrical power cost adjustment charge) now being fixed, plus there is a possibility that the excise tax on diesel fuel will be raised, while minimum wage increases have been postponed to April 2012, it is expected that inflation will slow in 1Q12 and it may rise significantly again on a monthly basis in 2Q12. For overall 2012, we at KResearch are maintaining our base-case forecast that Headline Inflation will be about 3.9 percent and Core Inflation at 3.0 percent.
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