Thailand's inflation exhibited a steady decline during September with Headline Inflation at an almost four-year low of 1.42 percent YoY, down from 1.59 percent YoY recorded in August. Core Inflation also fell for the tenth straight month to its lowest level in 41 months at 0.61 percent in September, compared to 0.75 percent YoY reported in August. However, the September Consumer Price Index (CPI) edged up to 0.16 percent MoM. The effect of recent hikes in expressway tolls and utility electric power “Ft” surcharge, plus an increase in cooking gas price, beginning in September on inflation was almost at the same level expected by KResearch.
The “Kin Jae” festival and flooding in many areas may drive up fresh food prices, especially fruit and vegetables. As a result, Headline Inflation may rise to 1.5-1.6 percent YoY, which would be slightly higher than 1.42 percent YoY recorded in September.
We at KResearch maintain our view that consumer product prices will probably increase at a measured pace amid subdued household spending ahead. In addition, the government's decision to extend various measures to help ease the rising cost of living on consumers, e.g., free bus and train services, will help keep overall transport costs at the current level until 1Q14. Nevertheless, hikes in certain fuel prices given the government's planned energy price restructuring and rising global energy prices may drive up monthly inflation during 4Q13. Thus, KResearch has assessed that 4Q13 Headline Inflation may rise near 2.0 percent YoY, up over 1.7 percent YoY reported in 3Q13.
With the smaller than expected increase in the transfer of costs to consumer product prices seen in recent months, we expect that Headline Inflation and Core Inflation for 2013 may lean toward the lower end of our forecast ranges at 2.1-2.5 percent and 0.8-1.2 percent, respectively.
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