Higher oil prices drive up inflation in August

The Commerce Ministry's Trade Policy and Strategy Office Director, Poonpong Nainapakorn, said the Consumer Price Index (CPI) in August was 108.41 compared to 107.46 in August 2022. This has resulted in a general year-on-year (YoY) increase in the inflation rate of 0.88%, slightly up from 0.38% in July, due to the rising prices of energy-related products.

While the prices of fresh food, meat, and food components remained stable, other categories, excluding food and beverages, increased by 0.98% (YoY) due to the rising prices in transportation and communication, especially fuel prices, which have adjusted upwards following global market trends, except for diesel, which saw a decrease.

Public transportation costs increased due to rising costs. Additionally, the costs of electricity, gas for cooking, personal care products remained higher than the previous year.

However, there were important items that saw price decreases, including men's and women's clothing, children's clothing, electrical appliances, cleaning products and surgical masks.

Food and non-alcoholic beverages increased by 0.74% (YoY), with prices remaining relatively stable compared to the previous year-end. Key items that saw price increases included eggs and dairy products, vegetables and fresh fruits due to variable weather conditions affecting production volumes. Non-alcoholic beverages, glutinous rice and processed foods also saw prices go up.

Important items that saw price decreases included pork, fresh chicken, vegetable oil, coconuts, tamarind and certain fresh vegetables.

Basic inflation, when excluding fresh food and energy, increased by 0.79% (YoY) for the eighth straight month (since January of this year), reflecting the continued pressure on production costs beyond energy prices.

Nevertheless, the overall CPI for August this year increased by 0.55% month on month (MoM) compared to July, with other categories, excluding food and beverages, increasing by 0.76% (MoM), particularly fuel prices in various categories, including gasoline, LPG, and diesel, as well as housing rents.

However, the economic situation in Thailand's key trading partners has remained subdued, and the tightened financial measures by the Bank of Thailand have had an impact on domestic consumption and investment.

Furthermore, there are factors related to government measures that may be introduced in the near term, which could have a significant impact on inflation, such as reducing the cost of living and reducing production and service costs (public transportation fares, oil prices, electricity prices, gas prices). Political instability is also a factor to monitor closely.

Overall, the Commerce Ministry predicts general inflation for this year to be between 1-2% (average 1.5%). If the situation changes significantly, a review will be conducted. The Consumer Confidence Index for August of this year increased slightly to 53.4 from 53.3 in the previous month, reflecting a slight improvement in consumer confidence in the future (3 months ahead), while the current consumer confidence index has decreased slightly.

The average Consumer Price Index for the first eight months of this year, compared to the same period last year, increased by 2.01%, falling within the target range of 1-3% set by the finance minister and the Monetary Policy Committee.

Inflation in September is expected to remain relatively stable or make a slight adjustment. Factors contributing positively to inflation rates include energy prices, including fuel, electricity, and cooking gas, which remain at high levels.

Domestic stimulus measures by the government are expected to increase, while the severe drought conditions in many countries worldwide have reduced agricultural and livestock production, leading to higher prices of food and related product categories.

However, the economic situation in Thailand's key trading partners has remained subdued, and the tightened financial measures by the Bank of Thailand have had an impact on domestic consumption and investment.

Furthermore, there are factors related to government measures that may be introduced in the near term and have a significant impact on inflation, such as reducing the cost of living and reducing production and service costs (public transportation fares, oil prices, electricity prices, gas prices). Political instability is also a factor to monitor closely.