Friday, March 25, 2011

February 2011 CPI: Accelerating

If anybody wants to complain about inflation now, be my guest. For the first time since late 2009, the CPI is now back on its long term trend (log annual and monthly changes):


I’m sure February’s figures probably accords more with what people are seeing on the ground. More critically, with few exceptions, the rise in the price level is pretty much across the board. Core inflation is closing on the important 2.0% level, and the pain index (food+transport) has increased 0.8% for three months straight – that’s a 10% annualised rate. Very obviously, we’ve had a perfect storm of external supply shocks (food, oil) and internal demand shocks (petrol price adjustments, CNY).

BNM on Wednesday are forecasting an average 2.5%-3.5% inflation rate for the year, so we might soon be looking back at February’s increases with nostalgia. An average 3.0% inflation rate for the year means we’ll probably see higher than that for some of the months in the coming year.

Now this isn’t necessarily bad, IF wage increases keep pace with inflation. But given the poor bargaining power of workers relative to employers, and generally low union representation, that’s not a given by any means.

Technical Report:

February 2011 Consumer Price Index Report from the Department of Statistics

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