Colombo Consumer Price Index dips 0.8% in April despite festive demand

Colombo district prices have declined by 0.8 percent in April from a month ago. This was helped by the drop in both food and non-food prices in the month, in what appeared to be an idiosyncrasy as typically prices get a bump up during the festive month.

Inflation measured by the Colombo Consumer Price Index (CCPI) fell after declining 1.9 percent in March, but the prices measured annually recorded a 1.5 percent increase.

The inflation measured annually declined to 0.9 percent in March due to both lower prices and higher base effects last year.

As a result, there were expectations for slightly higher prices in April from the level recorded in March.

Food prices rose by 2.9 percent in April from a year ago, cooler than 3.8 percent in March while non-food prices rose by 0.9 percent, after declining by 0.5 percent a month ago.

However, measured on a monthly basis, food prices have been on a deflation for the third month in a row. In April food prices fell by 1.0 percent.

Meanwhile, non-food prices fell by 0.7 percent after falling by 1.9 percent in March.

The core prices which are measured barring the often volatile items such as food, energy and transport rose to 3.4 percent from 3.1 percent in March.

The core prices indicate the underlying price pressures in an economy.

The softer prices offer more room for the Central Bank to ease policy further. It cut policy rates by 50 basis points in March.

Some economic analysts argue that the recent decline in prices is mainly attributable to the appreciation in the rupee by about 9.0 percent so far this year, which more than offset the year earlier price pressures coming from the increase in Value Added Tax and the supply interruptions.

Hence, they do not think current inflation could be sustained longer as the dollar strength could build up again and the favourable base effects will also dissipate from the second half.

The Central Bank targets 5 percent inflation for 2024.