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Thai Inflation in July Below Market Expectations, Prompting Reevaluation of Current Rates

The Office of Trade Policy and Strategy (TPP), under the Ministry of Commerce, has released the latest data on Thailand’s consumer price index (CPI) or headline inflation for July. The report indicates that inflation rose by a modest 0.38% during the month, showing a slight increase compared to the previous period. However, this figure is lower than market expectations, which had predicted a range of 0.64% to 0.66%.

The persistently low inflation is attributed to several factors, including lower prices of food products such as pork and condiments, as well as declining fuel prices throughout July. Additionally, the high base effect from the same period last year contributed to the overall subdued inflationary pressure. The average headline inflation rate for the first seven months of the year (January to July) stood at 2.19%.

The Core Consumer Price Index (Core CPI) or core inflation for July rose by 0.86%, indicating a deceleration from the previous month. Consequently, the average core inflation rate for the first seven months of 2023 reached 1.73%.

Looking ahead, the Ministry of Commerce is closely monitoring key factors that could impact inflation for the remainder of the year. These include drought conditions, volatility in global crude oil prices, and geopolitical conflicts, particularly the Russian-Ukrainian war. For the next four to five months, the forecast suggests that headline inflation will average an increase of no more than 1% per month.

Despite the current outlook, the Ministry of Commerce plans to revisit its inflation rate projection for 2023 in September. The expectation is to revise the current estimate of 1-2% for the year.

Analyzing the inflation trends for July, prices of food and non-alcoholic beverages decreased by 0.01% compared to June. Notably, there was a reduction in prices of pork, beef, aquatic animals, vegetables, and fruits. Conversely, some categories experienced slightly higher prices, such as house rent, cleaning-related items, and personal use. Prices of airfare and products like diesel fuel, men’s and women’s shirts, electrical appliances, detergents, softeners, and shampoos decreased.

Looking into August, inflation is expected to expand slightly within a narrow range. This is supported by certain food products continuing to expand due to drier weather conditions affecting output. Additionally, ready-to-eat food prices remain high, and fuel prices are likely to be impacted by OPEC production cuts and the ongoing tension in the Russian-Ukrainian conflict.

The director of the National Planning Office (NPO) has pointed out that any delay in the establishment of a new government beyond the scheduled timeframe could potentially affect investment, employment, and tourism. Such impacts would indirectly affect people’s purchasing power and have implications for long-term inflation. However, if the government can be established during August or September, it is not expected to significantly affect the purchasing power of the people.

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