Inflation increase slowed by 1.09% in July

The PPN has dropped by 4.90% in the past 12 months due to price increase in the economy

The Consumer Price Index (CPI) for the month of July 2021 increased by 5.15% compared to the same month the previous year, according to the CPI Bulletin for July this year released by the National Statistics Bureau (NSB) recently.

This means that the prices of goods and services increase slowed by 1.09% point as compared to June which recorded a 7.42%  increase.

According to the report, the increase in July is due to the increase in food and non-alcoholic beverages which rose by 3.52%, contributed by an increase in price of oils and fats by 20.20% and cereals and bread by 6.77%. Prices of transport rose to 7.62%, mainly due to an increase in fuel prices (petrol and diesel) by around 33%.

However, the main contributors are alcoholic beverages and betel nuts (increased by 16.96% due to an increase in betel nuts by 26.74%). Communications dropped by 10.92% in the past one year due to reduction in call and data charges.

According to the report, the price of vegetables, meat, dairy products and alcoholic beverages contributed majorly to the rise.

Within the food group, prices of betel nut and betel leaves recorded the highest increase with 45.95%, followed by meat price which went up by 36.56%, and fish and vegetables with 26.54% and 21.04% increases respectively. 

However, non-food prices recorded a higher increase by 1.63% compared to food prices which went up by 0.46% only. Clothing and transport items were the main contributors to non-food with 2.59% and 1.95% increases respectively.

Most other groups recorded an increase over the past one month except for communication and betel nuts and leaves which decreased by 0.29% and 0.02% respectively. 

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.

The NSB’s report also shows that the month-on-month prices increased by 1.09% due to an increase in clothing and footwear by 2.59%, followed by transport with 1.95%, and housing and utilities by 1.85%.

However, alcoholic beverages and narcotics (betel nuts and betel leaves) dropped by 0.02% compared to the previous month this year.

 According to the report, the purchasing power of Ngultrum as measured by the CPI is Nu 64 as of March 2021 compared to December 2012. This means that Nu 100 in January 2021 is worth only Nu 64 in December 2012.

The PPN has dropped by 4.90% in the past 12 months (from March 2020 to March 2021) due to price increase in the economy.

Likewise, the Year-on-Year (YoY) inflation rate (as measured by PPI) for May, June and July as compared to the same months of the previous year is recorded at 1.80%, 1.59% and 1.09% respectively.

 The inflation was mainly due to the increase in the manufacturing sector by 5.15% in March. Within the manufacturing sector, the increase in price of basic metals was the main contributor which led to the overall increase. Prices in the transport sector increased by 7.62% on average due to the increase in exchange rate and increase in the RSTA’s bus fare. 

Kinley Yonten from Thimphu