Thailand's Headline and Core Inflation rates for March 2013 slowed to 2.69 percent YoY and 1.23 percent YoY, the lowest in nine and 27 months, respectively. Consumer product prices inched up 0.07 percent (MoM) over February. Higher prices were evident in fruit and vegetables (up 2.8 percent MoM) due to climatic effects on harvests. However, that situation was offset by falling meat prices (-0.62 percent MoM) because of a glut in the market and slowing demand during the summer school break, plus retail oil prices that have been diminishing (-0.40 MoM) in line with global price movements.
The inflation rates for 1Q13 correspond with KResearch estimates; however, we are of the view that a number of variables should help ameliorate inflationary pressure that could rise as businesses pass on cost burdens to consumers. Putting aside Baht appreciation and the global oil price trend, KResearch believes that the extension of government subsidies toward transportation, as well as their postponement of LPG price restructuring, should offset the effect of higher fresh food prices as a result of drought, thus lessening inflationary pressure over coming months.
Given these factors, along with ebbing domestic spending, cost burdens passed on by businesses should not spell trouble for consumers. Our estimate for Headline Inflation in 2013 may move slightly from our base rate at 3.3 percent, approaching the lower end of our 3.0-3.6 percent forecast range.
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