January 2013 inflation was in line with our forecast. Headline inflation was 3.39 percent YoY, lower than December's 3.63 percent. January Core inflation decelerated for the second straight month to 1.59 percent YoY, the lowest level in almost two years (since March 2011) and down from 1.78 percent in December. Meanwhile, consumer prices rose only 0.16 percent, MoM, reflecting a mixed picture of goods prices even though they had been anticipated to be higher due to rising production costs in light of daily wage hike of THB300 nationwide, plus the higher FT charge and retail oil prices.
Over several months ahead, KResearch still expects that inflation may rise over-month on rising production costs. With January inflation in line with our prediction, we have thus maintained our projections for Headline and Core Inflation this year at 3.3 percent (or within a range of 3.0-3.6 percent) and 2.4 percent (or within 2.2-2.8 percent), respectively.
In our view, inflationary pressure may gradually rise given the government's price monitoring initiatives and their leeway for the delay in energy price restructuring and the continued subsidization of domestic fuel prices through the Oil Fund should there be other forces that could put further pressure on the cost of living.
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