Bhutan’s producer prices fall 4.55% in third quarter

Bhutan’s producer prices fall 4.55% in third quarter

Decline in prices of goods in manufacturing sector led to the drop in producer price index (PPI) to 4.55% in the third quarter (July to September) from the previous year, states the National Statistical Bureau (NSB).

The PPI measures the average price change of goods and services overtime from producer’s perspective unlike consumer price index (CPI) that measures the price change from the purchaser’s perspective.

The year on year(y/y) inflation rate for July, August, and September as compared to the same months of the previous year were recorded at -4.02%,-4.89% and -4.74% respectively.

The deflation was mainly due to decrease in manufacturing sector by 8.90%, 10.53%, and 10.15% in July, August, and September respectively.

The decrease in price of ferrosilicon by about 30% was the main contributor that led to the overall drop in manufacturing sector.

Metal products, machinery, and equipment saw a drop of 15.95% in July, 17.85% in August, and 17.36% in September, this year.

Transport sector recorded the highest increase followed by mining and quarrying, while prices remained same for logging, electricity and gas, water supply and information and communication sector.

Moreover, for month-to-month inflation, PPI decreased by 0.67% on an average due to drop in price of manufacturing sector by 0.33%, 2.38% and 1.57% in July, August and September which is associated with the decrease in price of ferrosilicon.

The mining sector showed a slight increase by 0.82% in July, while it decreased in August and September by 0.64% and 0.40% respectively.

Transport sector recorded an increase of 0.34% on an average and it is due to the increase in exchange rate.

Prices remained same for logging, electricity, water supply, and information and communication sector for all the three months.

While, CPI a measure of average price changes in the basket of goods and services purchased by households over time revealed that consumers are paying 2.49% more in September this year than what they paid last year for the goods and services in the CPI basket.

CPI baskets has 113 items (314 varieties) classified according to Classification of Individual Consumption According to Purpose.

The rate was 0.2 percentage point lower than the change recorded in the same month of previous year (2.7%) and 0.29 percentage point lower than previous month of August 2019 (2.78%).

Weights reflect the relative importance or share of the individual item to the total consumption expenditures of the households. It determines the impact an individual item will have to the overall inflation.

The purchasing power of ngultrum (PPN) as measured by CPI is Nu 72 as of September 2019. This means, Nu 100 in September 2019 is worth only Nu 72 at December 2012 price.

The PPN dropped by 2.43% in the past 12 months (from September 2018 to September 2019) due to price increase in the economy.

Thukten Zangpo from Thimphu