Thailand: Inflation rises in October after farmland suffers flood damage
November 2, 2011
In October, consumer prices added 0.19% over the previous month, which contrasted the revised 0.33% drop registered in September (previously reported: -0.32% month-on-month). The monthly rise reflected higher prices for fresh food, particularly for rice (+0.63 mom), as the devastating floods have damaged large swathes of agricultural land. Owing to the monthly rise, annual headline inflation rose from 4.0% in September to 4.2% in October. The reading, nevertheless, fell short of market expectations that had inflation rising to 4.5%. The core inflation index, which smoothes more volatile categories such as fresh food and fuel, added only 0.07% over the previous month (September: 0.10% mom), driving annual core inflation to 2.9% in October, where it now sits a notch below the Central Bank's upper-target range of between 0.5% and 3.0%. Around 10% of the current rice harvest has been damaged by the floods and local rice traders have estimated that rice prices will rise 20% to 25%, which could add between 0.4 to 0.5 percentage points to headline inflation. However, on the back of lower pressures from global commodity prices, the Central Bank revised its inflation forecast for this year and now expects it to average 3.8%, slightly down from its previous 3.9% estimate. For 2012, the Bank expects inflation to average 3.5%, which is up from its previous 3.2% projection.
Author: Ricardo Aceves, Senior Economist