Thailand’s inflation surprises on the downside; core inflation weakest in 7 years

Thailand’s headline and inflation surprised on the downside yet again in April. Core inflation is at its weakest in seven years. The contraction in food prices further weakened the headline number. Underlying inflationary pressures are still weak despite the stabilisation in economic activity.

Both headline and core inflation declined in April. Core inflation pulled back to 0.50 percent y/y, the lowest print in seven years. The decline in food prices exacerbated the weakness in the headline print.  At 0.38 percent y/y, it is even lower than our own below market forecast of 0.48 percent.

Domestic demand is still not strong enough to endanger inflationary pressures. Private sentiment remains weak, despite improvements in exports and tourism. However, the sustainability of overall growth improvement remains unclear.

"We still expect inflation to stay in the lower half of the central bank’s 1-4 percent target range for the headline inflation. We will be revisiting our 2017 inflation forecast currently at 1.4 percent. Considering the lack of upward inflationary pressures, we see no reason for the central bank to adjust its supportive policy stance through 2017," ANZ Research commented in its latest report.