June consumer good prices increased slightly MoM, led by higher non-food and beverage prices, e.g., transport fares, medical expenses and utility costs – for electricity, fuel and water – that offset lower prices for fresh foods, freight/logistics and communications that dropped in line with the 3.0-6.0 percent decreases in domestic oil prices during the month. Thus, Headline and Core Inflation for June 2012 remained barely unchanged at 2.56 percent and 1.92 percent (YoY), respectively, close to the 2.53 percent and 1.95 percent YoY in May.
Regarding the inflation outlook, KResearch expects that the Headline Inflation in 2012 will average approximately 3.5 percent (ranging between 3.2-3.9 percent), whereas the Core Inflation may average 2.6 percent (ranging between 2.4-2.8 percent), and is believed could rise close to 3.0 percent by the yearend. Thailand's 2H12 inflation is expected to be on an upward trend due to the low base of last year, which is a technical factor. Meanwhile, 2012 inflation may peak in 4Q12 when Ministry of Commerce's request to fix prices and NGV/LPG price pegs (for transportation sector) will end. Meanwhile, other production costs, such as Ft charge will likely be revised during that period.
Although the Eurozone debt crisis may overshadow the global economy during 2H12, KResearch views that 2H12 situation should differ from 1H12, due to global oil prices that may spurred by occasional concerns over oil supply (the psychological effect of sanctions against Iran starting in early July). In addition, Mideast unrest may have a role in determining oil prices, and eventually affect the timing of Thai energy price restructuring—a key factor toward the inflation trend.
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