Thai CPI sinks to 4-month low in June on lower fuel prices

02, Jul. 2019

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BANGKOK, NNA – Thailand’s consumer price index posted the slowest pace in four months in June, rising 0.87 percent year-on-year, due mainly to lower fuel costs amid falling crude oil prices.

The ministry trimmed down its annual median inflation forecast to 1 percent from 1.2 percent projected in January amid weaker economic sentiment after the country’s GDP growth slid to the lowest in more than four years in the January-March quarter.

The Commerce Ministry released its latest monthly Consumer Price Index report on Monday.

Key points:

―― Year-on-year inflation decelerated to 0.87 percent after a 1.15 percent increase in May, the slowest since the 0.73 percent rate recorded in February. The June figure was weaker than the median forecast of 1.1 percent by 11 economists in a Reuters poll.

―― In the first half of 2019, Thailand’s CPI rose 0.92 percent, slightly below the central bank’s target of 1 percent.

―― In June, inflation was led mainly by higher food prices, up 3.12 percent year-on-year after increasing 2.83 percent in the previous month, due to prolonged hot weather that has caused lower crop yields. Vegetable and fruit prices surged 12.7 percent in June from a year earlier after rising 11.08 percent in May.

―― The increase in food prices were offset by lower fuel prices, which tumbled 6.26 percent on year after the previous month’s 1.20 percent drop, posting the second consecutive month of declines. Energy prices sank 3.86 percent in June, after shrinking 0.49 percent in May.

―― Core inflation, excluding volatile food and energy items, decelerated to 0.48 percent in June after a 0.54 percent gain in May. It came in slightly lower than the median economist forecast of 0.51 percent.

―― On a month-on-month basis, seasonally adjusted headline inflation rate shrank 0.36 percent in June after 0.48 percent gain in May. It was the first month-on-month drop in five months.

Takeaway:

―― The director-general of the Commerce Ministry’s Trade Policy and Strategy Office, Pimchanok Vonkorpon, told reporters that the ministry cut its annual median inflation rate forecast to 1.0 percent from 1.2 percent. The move was unexpected given that Pimchanok had said last month the ministry would revise up the yearly target due to the base-year effect.

―― She said Thailand’s weaker-than-expected GDP reading in the first quarter of 2019, which was the slowest since the fourth quarter of 2014, is the main factor to revise the target.

―― Pimchanok expects food prices to continue rising for the rest of the year, citing the base-year effect of low food prices in the second half of 2018.