Headline inflation in January 2012 continued to ease on falling prices for food and beverages. However, gradual increases in consumer prices over-month in January could be attributed to notable increases in energy, utilities (electric power, water supply) and building materials costs over late last year. This may marginalize consumer purchasing power.
The CPI for January 2012 edged up 0.39 percent MoM, led by hikes in domestic retail fuel prices, utilities, ready-to-eat food, vehicles and motor fuels, building materials, cleaning supplies and personal care items. Nonetheless, fresh food prices plunged amid refreshed inventories, post-flooding. Meanwhile, January headline inflation slowed for a second successive month to 3.38 percent YoY, from 3.53 percent in December 2011, due mainly to a high base of comparison. Core inflation for January rose to 2.75 percent YoY, edging higher than the 2.66 percent in the previous month.
For the entire 2012, consumer prices may be on an upward trend. KResearch holds the view that inflation may decelerate in 1H12 to 3.3 percent YoY due to a high base effect. Nonetheless, Thai economic growth momentum and a pass-through of higher producer costs (especially rising energy prices and wages) into consumer prices may elevate inflationary pressure in 2H12, with headline inflation in 4Q12 to exceed 4.0 percent. We at KResearch therefore maintain our projection for headline inflation at 3.9 percent (or within our projected range of 3.5-4.5 percent) and core inflation at 3.0 percent (2.6-3.6 percent).
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