National inflation accelerates to 5.1% amid 9% rise in food prices

• Non-food inflation also up by 2.0%, from 1.9% in Feb.
• Core inflation increases to 4.3%, from 4.1% in Feb.

Sri Lanka’s national prices measured by the National Consumer Price Index (NCPI) picked up pace in March, ahead of the traditional New Year shopping season, as increases were seen in categories such as transport, restaurants and clothing.

According to the NCPI, the price rose sharply by 5.1 percent in the 12 months to March 2021, accelerating from 4.2 percent in February and marking the second consecutive month of price gains. 

While the higher prices ahead of the New Year are typical, it is yet to be seen if the March prices are transitory or more persistent in nature. The Central Bank’s tolerance level of inflation stands between 4 and 6 percent. The food prices, which have the most weightage in the basket, rose by as much as 8.8 percent during the 12 months to March 2021, 

accelerating from 6.9 percent in February, indicating that people are now paying nearly 9 percent on their food staples than a year ago, without a meaningful increase in their incomes. 
This condition was also mirrored in the producer prices since October, last year. 

The 12-month moving average of food prices, which measures the change in prices during the most recent 12 months compared to the previous 12 months, has been consistently rising by over 10 percent since August, last year through March 2021. 

This was just 5.1 percent in March 2020, before the economy was closed for the pandemic and the so-called mega movement on local cultivation and production kick started with massive government assistance to farmers in almost every sector.

However, on a month-on-month (MoM) basis, the food prices recorded a negative growth of 1.4 percent from the levels seen in February.

Meanwhile, non-food inflation rose by 2.0 percent during the 12 months to March, up from 1.9 percent in February, with increases seen in specific categories related to out of home economic activities such as dining, recreational activities and travelling. 

For instance, transport had the highest increase, followed by categories such as restaurants and hotels and clothing. The prices on an MoM basis too showed a similar trend, with the restaurants and hotels category rising the most.

As a result, on an MoM basis, non-food prices rose by 0.3 percent, accelerating from 0.1 percent in February.

The so-called core prices, barring the often volatile items such as food and energy, rose by 4.3 percent during the 12 months to March, accelerating from 4.1 percent in February.