Food prices dominate inflation trend

Food prices continue to be the main driver of inflation at 12.70 percent

Sonam Penjor

The Consumer Price Index (CPI) for the month of May 2021 increased by 8.69 percent from May 2020. However, the Month-on-month CPI decreased by 0.64 percent from April 2021.

The prices of goods and services consumed by the households are 8.69 percent costlier in May compared to the same month of previous year, this is according to the CPI, May, 2021 which was published by National Statistics Bureau recently.

This is a drop of 0.09 percentage point compared to April while the rate has doubled compared to the rate in May last year which was at 4.17 percent.

Food prices continue to be the main driver of inflation at 12.70 percent. The CPI report states that within food, betel nut and betel leaves recorded the highest increase with 40.75 percent, followed by meat with 37.21 percent and cooking oils at 20.21 percent.

Prices of non-food items went up by 5.40 percent in the past one year with garments and transport recording the highest increase of more than eight percent.

Increase in transport is mainly due to price of petrol and diesel which went up by more than 60 percent on average. Communication prices dropped further by 16.09 percent with the reduction in the call charges in May.

Month-on-month prices decreased by 0.64 percent from April to May with both food and non-food group recording a decrease of 1.38 percent and 0.01 percent respectively, added the CPI report.

While month-on-month percent change measures the average price change between current month and previous month and serves as useful indicator of short-term price movement.

Drop in vegetable prices contributed to the decrease in food group, while for non-food, it is due to drop in communication price (call charges).

Meanwhile, the purchasing power of Ngultrum as measured by CPI is Nu 64 as of May 2021 compared to December 2012. This means, Nu 100 in May 2021 is worth only Nu. 64 at December 2012 prices. The PPN has dropped by 8.00 percent in the past 12 months from May 2020 to May 2021 due to price increase in the economy.

The report states CPI is a measure of average price changes in the basket of goods and services purchased by households over time. It shows how much, on average, prices of goods and services have increased or decreased from a particular reference period, commonly known as the Index reference.

The CPI covers the goods and services consumed by the households and a sample of goods and services are selected using the household expenditure data to measure the inflation experienced by the households.

Prices of the sampled goods and services are collected from urban areas in 20 Dzongkhags on monthly, quarterly and annual frequency depending on the price volatility of the items.

The outlets for data collection are selected based on purposive sampling considering the popularity of the outlet and availability of the items. CPI baskets has a total of 113 items (314 varieties) classified according to Classification of Individual Consumption According to Purpose (COICOP). Total of about 450 outlets are selected for pricing.