CPI Review Consumer Price Index (CPI) in January 2017 increased due to the rise in prices of motor vehicle registration fees, electricity tariff, foodstuffs, mobile phone tariff, gasoline, car, gold jewelry, and ho

Monthly Inflation:” Still Benign”

CPI Review

Consumer Price Index (CPI) in January 2017 increased due to the rise in prices of motor vehicle registration fees, electricity tariff, foodstuffs, mobile phone tariff, gasoline, car, gold jewelry, and hospital tariff. Furthermore, monthly inflation reached 0.97% m-o-m, higher from 0.42% m-o-m in the preceding month. Based component, the inflation was posted by the transportation and communication component rose by 2.35% m-o-m, the housing component increased by 1.09% m-o-m, and the foodstuffs component experienced rose by 0.66% compared to preceding month. Moreover, the prepared food component rose by 0.47% m-o-m, the medical care component increased by 0.50% m-o-m and. Furthermore, the education component slightly increased by 0.12% m-o-m and by the clothing component rose by 0.33% m-o-m.

Inflation in the transportation and communication component in January 2017 came primarily from higher prices of motor vehicle registration fees, mobile phone tariff, gasoline, and car prices.

Meanwhile, inflation in the foodstuffs component in January 2017 mainly stemmed from higher prices of chili, fish, chicken meat, rice, salt fish, potato, carrot, grapes, oranges, melon, water melon, and cooking oil. We believe the price increase in these products were mainly due to

a.   Lower domestic supply

b.   Higher domestic demand

Furthermore, inflation in the housing component in January 2017 came primarily from higher prices of electricity tariff, housing rents, housing contracts, labor wages, and servant wages. Inflation in the medical care component in January 2017 came primarily from higher price of hospital tariff.

Moreover, inflation in the prepared foods component in January 2017 mainly stemmed from higher prices of rice with meal, cigarette, white cigarette, and filter cigarette. Inflation in the education, recreation and sports component in January 2017 mainly stemmed from higher prices of courses/training sub-sector.

Meantime, inflation in the clothing component in January 2017 came primarily from higher prices of gold and jewelry.

On a yearly basis, inflation remains in check with the upward trend still intact, as the inflation increased to 3.49% y-o-y in January 2017 compare 3.02% y-o-y in the previous month. Furthermore, year to date inflation in January 2017 reached 0.97% higher than 0.51% for the same time frame in 2016.

CPI Outlook

We expect inflation pressures are still benign in February 2017. Inflationary pressures are still rooted in electricity tariffs, although not as big as the previous month. Meanwhile, foodstuffs prices are still high, but tend to decrease as red chili sauce, chili sauce, chicken, eggs, and sugar. While, prices of beef, rice, cooking oil and instant milk are still experiencing an increase. The price of gold jewelry also showed a slight increase. Based on these factors, we expect the consumer price index in February 2017 may increase 0.28% m-o-m lower than in January 2017 which reached inflation 0.97% m-o-m. However, we expect the yearly inflation rate in February 2017 will increase to 3.88% y-o-y from 3.49% y-o-y in January 2017. Looking ahead, we also expect inflation may reach 4.28% y-o-y by the end of 2017.

Meanwhile, we expect core inflation is still tame in February 2017. Core Inflationary pressure is still caused by rising prices of gold jewelry, car, housing rent, and housing contract. We expect core inflation in February 2017 may reach 0.26% m-o-m lower than 0.56% m-o-m in January 2017. Furthermore, we expect the yearly core inflation in February 2017 will decrease to 3.30% y-o-y from 3.35% y-o-y in the previous month. Forward looking, we also expect core inflation may reach 3.60% by the end of 2017.