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Published on September 4, 2007

Month on month, the consumer price index was down 0.5 per cent, but in the first eight months of the year it rose 1.9 per cent.

The falling CPI has raised concern about deflation, amid uncertainties about whether the general election late this year will be a boon to the economy. The National Economic and Social Development Board, however, yesterday said it was maintaining this year's economic growth target at 4-4.5 per cent.

Commerce Ministry permanent secretary Karun Kittisataporn said that slowing inflation would not lead to deflationary pressure, as some fear. He said inflation for the remainder of the year should increase slightly, as he expects the national poll will enhance people's spending.

Tax hikes for alcohol and cigarettes will also affect inflation over the next five months, by 0.13 per cent, he added.

"The CPI was low last month because of good prices and a decrease in fuel costs, but it does not reflect a slowdown in consumer spending," said Karun.

The ministry also reaffirmed that inflation for the whole year would be in the range of 1.5-2.5 per cent, as the ministry previously projected.

In the food and beverage sector, prices increased by 4.3 per cent year on year due to a rise in the price of sticky rice, chicken, vegetables and fruit. Prices in the non-food and beverage sector decreased 0.7 per cent from the same period last year, mainly because of a drop of 5.2 per cent in fuel prices.

Core inflation in August rose 0.7 per cent from the same period last year, but remains unchanged from July.

During the first eight months of the year, core inflation was up 1.1 per cent compared to the same period last year.

Core inflation is a measure that excludes certain items whose prices are considered volatile, such as energy and food products.

In addition, the ministry reported that the cost-of-production index had increased by 0.3 per cent year on year last month, although it fell 2.5 per cent from July.

The index has fallen in three consecutive months because production costs from all industries dropped due to the strengthening of the baht.

Petchanet Pratruangkrai

 The Nation