Saturday, April 1, 2023

Colombo inflation eases for fourth straight month in January to 54.2%

 Inflation in the Colombo district further eased in January, continuing the disinflation path set off four months ago. But, the prices measured on a monthly basis increased predominantly due to the increase in food prices from the levels seen in December.  The consumer prices measured by the Colombo Consumer Price Index (CCPI) rose 54.2 percent in January 2023 compared to a year ago, easing from 57.2 percent seen in the twelve months through December 2022. However, the prices in January rose by 0.5 percent from a month ago, slightly faster than the 0.2 percent increase seen in December reflecting that price pressures still persist in the economy. 

Consumer prices measured annually have been slowing down for four consecutive months after peaking in September at nearly 70 percent, predominantly due to the high base effects in the corresponding period 
last year. Hence, the monthly price changes provide a better idea over the price pressures and give more visibility over the short-term price pressures. 
Meanwhile, the so-called core prices measured leaving out the often-volatile items such as food, energy and transport rose by 45.6 percent, slightly moderating from 47.7 percent. 

Core prices provide the underlying price pressures in the economy and are often used in policy making. 
Last week, the Central Bank said it expected the headline prices to return to the desired 4-6 percent range by the year-end supported by subdued aggregate demand conditions, expected improvements in both local and global supply conditions and the favourable statistical base effect. 

Meanwhile, food prices measured monthly rose by 0.6 percent in January after declining by 0.3 percent in December. Prices of sea fish, coconut and eggs rose the most during January among other things, outweighing the declines in prices of potatoes, bread, vegetables, chicken and the likes.  The increase in food prices however eased to 60.1 percent in January over the same month last year from 64.4 percent in December 2022. 

The increase in non-food prices eased to 0.3 percent from 0.6 percent in December 2022 as prices of transport fell on the back of the decrease in diesel prices while the cost of house maintenance, L.P gas and kerosene oil brought down the prices in housing and utilities sub-category. 
However, there were sharp increases seen in prices for education, alcoholic beverages and what people spent for clothing. 

The non-food prices measured on an annual basis decelerated to 51.0 percent in January from 53.4 percent. While food inflation has the potential to continue on the current disinflationary path, there is a possibility for non-food inflation to remain somewhat sticky as people begin spending more on travel and other recreational activities when the economy returns to some normalcy after the upheaval seen last year.

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