March 2014 Consumer Prices

March is the first month that we can see the impact on inflation from all those subsidy cuts and rate hikes in the last six months. It’s also the first month where we’re completely clear from the seasonal effect of CNY. The prognosis – nuthin’ much going on (log annual and monthly changes; 2000=100):

While the headline rate is still elevated on a y-o-y basis, price increases have fallen back to “normal” levels. Core inflation is a little higher than the average for the last 5 years, but food and energy prices barely budged.

It’s clearer to see looking at the actual indexes:

The slope of the indexes have all more or less returned to their pre-September rate of increase, which suggests there has been little pass-through from the policy-induced changes in the price level, into prices of other goods and services. In fact, the pain index is actually flatter – for now. The Fiscal Policy Committee is due to meet this month (I think), which means we might see a further cut in the petrol subsidy in the next month or so.

We’ve been taking bets on if, when and how much. My preference would be a 10 sen cut this round, and another 10 sen when the FPC meets again in September. That spreads out the pain a little more, and allows people to plan accordingly. The 20 sen increase last September was to big of a jump, even if it was necessary in the context of meeting the fiscal targets last year.

Technical Notes:

March 2014 Consumer Price Index report from the Department of Statistics