Fuel-led prices push September inflation up; but overall prices moderate from August

Fuel prices-led transport and other non-food items continued to nudge the prices in Colombo higher in September, but increased supplies in vegetables and coconut kept overall prices under check moderating the month’s inflation. 

Sri Lanka’s headline inflation according to the Colombo Consumer Price Index (CCPI) rose by 4.3 percent during the 12 months to September, slowing from 5.9 percent in August. 

As the easing food prices in September were considerable, it managed to bring the month-on-month (MoM) increase on prices to a negative 0.7 percent. 
The moderation in September inflation was led by a greater than expected decline in the food prices. 

Food prices contracted by 3.4 percent MoM— the largest contraction since August 2016. 

However, food prices in September rose by 2.3 percent from the same month in 2017. 

The drag on the food prices came from the considerable declines in vegetables, sea fish and coconut prices. 

The continued decline in vegetable prices was due to the increased supply of stocks to the market during the Yala harvesting season. 

However, the prices of rice, chicken and some fruit varieties rose during the month.  Under the non-food category, spends on education, restaurants and travelling led the price increases. 

Continuously increasing fuel prices caused higher prices in the transport sub-category while the fees paid to international schools pushed up the education sub-category. 

Prices on arrack and cigarette, clothing and footwear, exercise books and stationary too showed increases. 

As a result, the overall non-food category price rose by 0.5 percent MoM and 5.3 percent year-on-year (YoY), accelerating from the previous month. 

Meanwhile, the so called core prices, barring the often volatile items such as food and energy, rose by 3.8 percent YoY in September accelerating from 3.8 percent in August. 

The crashing rupee, rising oil prices and the festive importer demand could drive the prices further up during the next few months. 

The Sri Lankan rupee has lost its value by over 10 percent so far this year against the US dollar. 

Oil prices in the world market have risen 22 percent this year.