Business Times

January inflation gives mixed signals but prices overall seen rising in 2011

Inflation figures last month were mixed in both indicators used by the Department of Census and Statistics however economists say inflation is seen rising this year owing to a rise in the cost of essentials including oil prices. That is turn will see interest rates, which have fallen over the past 18 months, gradually climbing up, one Colombo-based economist noted.

According to a statement issued by the Central Bank this week, inflation, as measured by the Colombo Consumers’ Price Index (CCPI) (2002=100) fell to 6.8 % in January, on a year-on-year basis, from 6.9 % in December 2010, mainly due to the base effect. Annual average inflation rose to 6 % in January from 5.9 % in the previous month, owing to the price developments in the preceding 12-month period. The core inflation, which measures the price movement of non-food and non-energy items of the CCPI basket, eased by 3.6 % on a year-on-year basis and 6 % on an annual average basis in January from 5.6 % and 6.3 % respectively, in December 2010.

The contribution to the monthly increase of 1.3 % in the Index came mainly from price increases in the sub category of food and non-alcoholic beverages (2.1 %). Within the food sub category price increases were registered for vegetables, fruits, coconut, coconut oil, red onions and fish and sea food, primarily led by the supply shortages resulted from heavy rains. However, prices of rice, eggs, chicken, big onions and sugar declined. Further, price increases were recorded in the sub categories of clothing and footwear (2.1 %); education (1.6 %); health (0.3 %); furnishing, household equipment and routine household maintenance (0.1 %); and miscellaneous goods and services (0.9 %), the bank said.

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