Inflation continues to rise

Inflation continues to rise

The National Statistics Bureau (NSB) has released its monthly Consumer Price Index (CPI) report, which shows that the inflation rate increased to 4% in July 2023 compared to the same month last year. This means that the average prices of goods and services consumed by households increased by 4% over the period.

According to the report, the prices of both food and non-food items increased by 5.28% and 2.93% respectively. The report also reveals that the prices of all major divisions, except for transport, increased in July. The transport division saw a decrease of 5.08% in its prices, mainly due to lower fuel prices.

The highest price increases were observed in the divisions of food and non-alcoholic beverages with 5.36%, restaurants and hotels with 5.86%, and alcoholic beverages and betel nut with 4.11% respectively.

The report attributes the rise in food prices to the higher costs of meat, fish, eggs, dairy products, fruits, vegetables, and cereals. The increase in restaurant and hotel prices was mainly due to the higher costs of accommodation services, catering services, and meals away from home.

Additionally, the month-on-month CPI in July 2023 also saw an increase by 1.33% compared to June 2023, with an increase in both food and non-food prices. The price of food increased by 1.66% and the prices for non-food increased by 1.06%.

As compared to the month of June 2023, the price of transport increased by 0.16%, alcoholic beverages and betel nut increased by 1.57% and restaurants and hotels increased by 4.22%. The price of food and non-alcoholic beverages increased by 1.66%.

In 2022, the prices of household goods and services exhibited a growth by 5.64% from 2021 to 2022 which shows a drop of 1.71 percentage points compared to a 7.35% increase in 2021. The report reveals that the lower rate in 2022 was due to the lower rate of increase in the food items by just 3.95% compared to 9.38% increase in 2021.

Among the twelve major divisions, food prices contributed to about 34% of the overall inflation rate in 2022 and non-food contributed to 66% of the total increase.

In 2021, food prices were the main driver of the inflation rate contributing to almost 60% of the total increase. Among the 12 major divisions, food and alcoholic beverages contributed to more than 33% of the total increase in 2022, followed by transport with about 33% and clothing & footwear with about 13% contribution to the total increase.

Transport recorded the highest increase with 12.59% while alcoholic beverages and betel nut recorded the lowest increase with 1.16% in 2022, among the twelve major groups. All other divisions recorded an increase except for communication which dropped by 1.46%.

According to the CPI, it shows that the purchasing power of Ngultrum as measured by CPI is Nu 58 as of July 2023 compared to December 2012. This means, Nu 100 in July 2023 are worth only Nu 58 at December 2012 prices. The Purchasing Power of Ngultrum as measured by CPI has dropped by 3.85% in the last year from July 2022 to July 2023 due to price increases in the economy.

The CPI is a measure of the changes in the average prices of a fixed basket of goods and services that represent the consumption patterns of households over time. The CPI is used to calculate the inflation rate, which is an indicator of the general level of price changes in the economy.

The NSB collects price data from 20 dzongkhags and total of 450 outlets were selected for pricing across the country every month to compile the CPI.

The CPI baskets has a total of 113 items (314 varieties) classified according to Classification of Individual Consumption According to Purpose (COICOP). Weight for the current CPI is derived using the household consumption expenditure data from the Bhutan Living Standard Survey (BLSS) conducted every five years and the current weight is based on BLSS 2017.

Nidup Lhamo from Thimphu