Fall in food prices helps inflation to plummet in June

The Consumer Price Index (CPI)-based inflation rate was reported at 7.42% in June, which is down from 8.69% in May and 8.78% in April.

This has been attributed to a sharp fall in food inflation from 15.25% in March to 10.14% in June, the lowest since January this year.

The figures are according to the CPI Bulletin for June 2021 released by the National Statistics Bureau (NSB).

The decline in food inflation was brought about by a favorable base effect on vegetables. In January, vegetable inflation recorded its peak (under the current CPI series) at a staggering 15.25%. Such a high base resulted in the deflation of around 5% in the vegetable segment.

The report stated that prices of food and non-alcoholic beverages decreased by 2.51% due to a decrease in vegetable prices by 11.23%. Within the vegetables, the price of chili contributed to the decrease.

However, the inflation rate is 1.27% lower than the rate recorded in the previous month of May which was 8.69%.

Meanwhile, the 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.

According to the NSB’s report, the purchasing power of Ngultrum as measured by the CPI is Nu 65 as of January 2021 compared to December 2012. This means that Nu 100 in June 2021 is worth only Nu 65 in December 2012.

Kinley Yonten from Thimphu