Tag Archives: thai inflation

April inflation steady @ 2.42%

Key points are:

  • Food prices pushed headline inflation to 2.42%
  • Strengthening Thai Baht caused inflation to rise @ a slower pace
  • In 4M13, headline inflation rate was @ 2.9%YoY
  • The Commerce Ministry’s headline inflation forecast for the year remains @ 2.8% to 3.4%

So all in all, inflation not an issue, well done BOT, if it stays at these levels we don’t expect the BOT to cut rates going forward

130503 cpi

 

Thai inflation picks up slightly

Two days ago the Ministry of Commerce announced the inflation figures for June 2012, +2.56% YoY up from 2.53% in May.

Anything interesting?

  • House and furnishing prices increased 0.28% MoM (function of an increase in construction materials, rental fees, water and electricity chargers)
  • Food and beverage prices remained flat

Going forward?

  • We’ve mentioned continuously that inflation is only likely to pick up towards the end of 2012 at which point the BOT will increase rates.
  • Electricity fees will increase
  • The NGV, LPG and product price maintenance programs will end in August

Inflation Forecasts Comparisons
Bank of Thailand (Headline Inflation) 3.50%
Bank of Thailand (Core Inflation) 2.50%
Ministry of Commerce 3.3-3.8%
Fiscal Policy Office 3.60%
Source: BOT, MOC, FPO  

Thailand’s inflation slows slightly

The Ministry of Commerce reported May inflation at 2.53% YoY, up from 2.47% YoY in April and inline with market estimates of 2.50% YoY. On a monthly basis, the May CPI rose a for a 5th month by 0.39% MoM, pressured by the 1.14% MoM increase in food and beverage product prices (33.0% of CPI), led by the rise in meat, poultry, fresh vegetables and eggs in the start of the hot season. Transportation and communication prices (26.8% CPI) dropped 0.75% MoM after domestic fuel prices dropped with lower oil prices with the impact from the government 3-month suspension of the oil fund collections in an attempt to relieve the burden on consumers.

 

So what?

The BOT meets again on the 13th June, we’re not expecting any fireworks and expect that the BOT will maintain its 3% policy rate. Any rate hike will not happen until (1) The BOT sees evidence of inflation above 3% and (2) That won’t happen until the latter part of 2H12.

March Inflation numbers are in and up! Surprised?

Ok first the figures:

The Ministry of Commerce reported March inflation at 3.45% YoY, increasing from 3.35%YoY in February. On a monthly basis, the March CPI surged for a third month by 0.59% MoM. The key inflation drivers remained the food and energy categories; as food and beverage prices (33% of the CPI basket) increased significantly 0.66% MoM, especially the rise in vegetables and fruit, eggs and processed food from the drought Transportation and communication prices (26.8%) surged by 1.12% MoM due to the 3.83% MoM rise in domestic retail fuel prices with the impact from the re-instated government oil fund collections.

The March core inflation (excluding food and energy) rose to 2.77% YoY from 2.72% YoY in February and higher than the market estimate of 2.64% YoY. The PPI was flat at 1.82% YoY, the lowest in 30 months.

Now so what?

What I’m far more interested in is what the impact on inflation will be given that the minimum wage has increased as of 1st April to THB 300 / day in Bangkok, surrounding areas and in Phuket, along with a 39.5% rise in wages in the other provinces. Analysts have said that the new minimum wage impact is expected to be less severe than initially expected because the rate will only affect 1.3mn workers from the total labour pool in Thailand which is 37.9 mn. Taxi drivers, merchants, farmers will receive no benefit from this wage policy.

This wage increase policy may have its critics but life in Thailand is more expensive that it was 5 years ago, the prices of basic foods have increased faster than inflation, transportation is more costly, if this wage increase never came social unrest would’ve been a real possibility.

I can foresee several things changing though for the business structure in Thailand, companies will have be far more efficient with their resources, unemployment will rise in Bangkok, and sales prices will increase. What type of companies will benefit from this? The retailers primarily, within the next few months before the cost-push inflation kicks in from rising prices there will be additional consumer purchasing power, who loses the most from this? Any businesses that are highly labour intensive, basic low-value added manufacturing will be hurt tremendously.

So going forward I think inflation for Thailand will surprise to the upside, above what analysts and economists are predicting, and once the BOT sees this in the economic figures in late 3Q12 or early 4Q12, I fully expect for interest rates to begin rising.

Interest rates unchanged in Thailand

Last week the Bank of Thailand (BOT) announced that it would keep its benchmark rate unchanged at 3.00%. This follows 25-bp cuts each in November and January previously.

Now I’ve mentioned this before, the BOT will not increase interest rates UNTIL they see the economic figures for Thailand improving and this will not be the case until 4Q12 as that is when the economy will show a YoY recovery from the Thai floods last year. The only “If statement” would be if inflation creeps up higher within the next few months as a function of increasing commodity prices, increased wages or a combination of the two.

See below for pretty charts.