Analysis from Krungthai Compass Research Center

• The general inflation rate for August has turned negative for the first time in five months at -0.02% (YoY). This is primarily due to government measures aimed at reducing the cost of living, particularly in education fees, water, and electricity bills, as well as a decrease in prices of certain fresh food items. Additionally, energy prices have also shown slower growth. Furthermore, the core inflation rate has also softened to 0.07% (YoY).

• Krungthai COMPASS anticipates that inflation will likely begin to rise again in the remaining months of the year. This suggests that the average general inflation rate for 2021 will approach the lower target of 1%, supported by high crude oil prices compared to the previous year, the gradual end of government cost-reduction measures, and an expected increase in economic activities following the easing of lockdown measures.

The general inflation rate for August has turned negative for the first time in five months due to government cost-reduction measures and fresh food prices.
The general inflation rate for August stands at -0.02% (YoY), compared to 0.45% (YoY) in the previous month, contrary to analysts' expectations of 0.30% (YoY). The key factor is the government's measures to alleviate the cost of living, especially the reduction in education fees, utility bills, and a decrease in fresh food prices, which contracted by 3.73% compared to a contraction of 1.58% in the previous month. This is due to price reductions in certain fresh food items, particularly rice, meat, fresh vegetables, and fruits, along with energy prices growing at a slower rate of 5.99% compared to 6.30% in the previous month.

Similarly, the core inflation rate has softened to 0.07% (YoY) compared to 0.14% (YoY) in the previous month. This is partly due to a contraction in housing prices of 5.95% (YoY) and a decline in non-alcoholic beverage prices of 0.32% (YoY). For the first eight months of 2021 (January-August), the average core inflation rate is at 0.23%, while the general inflation rate is at 0.73%.

Krungthai COMPASS predicts that the average general inflation rate for 2021 will expand close to the lower target of 1%. Despite the negative general inflation rate for August, Krungthai COMPASS believes that inflation is likely to rise in the remaining months of the year due to the ongoing recovery of the global economy, which supports high crude oil prices compared to the previous year, and the gradual end of government cost-reduction measures. Additionally, the easing of lockdown measures that began on September 1, allowing many businesses to resume normal operations and relaxing interprovincial travel restrictions, particularly in the 29 dark red zones, will likely increase consumer spending and travel. This is reflected in the Apple Mobility Trends Report for the period of September 1-4, which shows signs of improvement. These factors will help support this year's inflation rate to expand closer to the lower target of inflation.