March inflation eases to 5.4% on lower food prices

• But panic buying leads to higher household spend on staples  

The headline inflation measured by the Colombo Consumer Price Index (CCPI) moderated in March after peaking in February on lower food prices.

But the Census and Statistics Department said it could not capture the prices from the third week in the month, when the lockdowns went in to play and thus, had to lean on the prices collected by the Central Bank. 

The headline inflation for the 12 months to March was recorded as 5.4 percent, down from 6.2 percent in February, pulling down the index value to 133.4, from 134.6 in February. The food price inflation decelerated to 12.8 percent year-on-year (YoY) in March, from 14.7 percent in February, while on a month-on-month (MoM) basis, the prices declined by 3.1 percent, after falling 0.2 percent in February. 

However, there were multiple reports of vendors charging exorbitant prices for some staples and flouting the maximum prices imposed on dhal, tinned fish and big onions since the second week of the month, as people significantly enlarged their usual grocery basket fearing possible shortages of goods, due to extended lockdowns. 
 

“Due to the prevailing situation of the country, the price collection by visiting stores was suspended from the third week of March 2020. 

Imputed prices used in the compilation of the CCPI were based on the retail prices collected by the Central Bank of Sri Lanka,” the statistics office said.

The prices of many varieties of rice, gram, bread, vegetables, red onions, potatoes and few others, declined in March while the prices of sea fish, yoghurt, coconut, fresh fruits, big onions and a few others, increased during the month. 

Meanwhile, the non-food price inflation rose by 2.5 percent YoY in March, from 2.8 percent in February, while this decelerated to 0.1 percent on a MoM basis.

Under the non-food category, all sub-categories showed increases in prices with the highest being the health and transport spend with blood tests and airline fares being the key contributors. 

The so-called core prices, measured barring the volatile items such as food and energy, rose by 2.9 percent YoY in March, falling from 3.2 percent in February.

According to economists, Sri Lanka’s demand-side inflation will remain muted so long as the lockdowns are in place but supply-side pressure could mount due to disruptions to local supply chains, as majority is barred from engaging in their livelihoods, although agriculture and few other industries have been designated as essential services.

However, the prices should remain muted as the harvest from the Maha season is also reaching the markets, provided a proper mechanism is in place to bring the produce to the market. 
Sri Lanka has a bumper harvest in the Maha season this time.