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Thailand Inflation Quickens to 13-Month High on Food Prices

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Jan. 2 (Bloomberg) -- Thailand’s inflation accelerated to a 13-month high in December, exceeding economists’ estimates, as subsidies failed to counter rising prices of food and fuel.

An index of consumer prices rose 3.63 percent last month from a year earlier, the Ministry of Commerce said in Nonthaburi province outside Bangkok today, compared with a 2.74 percent increase reported earlier for November. The median estimate of 12 economists in a Bloomberg News survey was 3.22 percent.

The Bank of Thailand cut the benchmark interest rate twice last year to support the economy as it recovered from the floods of 2011 and global demand for its exports weakened. The government has raised minimum wages and offered a diesel-tax subsidy to boost consumption, while the monetary authority has said inflation will slow to 2.8 percent this year.

“We expect the central bank to leave the key rate unchanged at least in the first half, unless there is an unexpected shock to the global economy,” Sarun Sunansathaporn, an economist at Tisco Securities Co. in Bangkok, said before the data release. “They may start raising the rate in the second half if food-price inflation and the impact from the wage increase kick in.”

The baht rose 0.3 percent as of 12:03 p.m. in Bangkok. The benchmark Stock Exchange of Thailand Index gained 1 percent, heading for its highest close since February 1996.

Within Range

Prime Minister Yingluck Shinawatra’s government last month extended the diesel-tax cut to end-January and approved a new round of increases in the daily minimum wage to 300 baht ($9.8) from the beginning of this year, after a similar raise in April in seven provinces including Bangkok.

“Inflation was higher in December mainly on rising food prices,” Permanent Secretary for Commerce Vatchari Vimooktayon said at a press briefing. The impact of the wage increase will “not be much” and price gains this year are expected to be within the range forecast, she said.

Consumer prices rose 0.39 percent in December from the previous month, according to today’s report. Inflation averaged 3.02 percent in 2012, the ministry said, predicting price gains of 2.8 percent to 3.4 percent in 2013.

Core inflation, which excludes fresh food and fuel costs, was 1.78 percent last month and averaged 2.09 percent last year. The central bank uses the measure to guide policy and expects price gains will stay below its target of 3 percent this year, the ceiling also for last year.

Thailand will use 2011 instead of 2007 as the base year for inflation and add more items such as natural gas for vehicles, Vatchari said. The new index will be announced in February, when data for January is scheduled to be released.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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