Inflation remains at single digit in 2011

As projected in the beginning of the year the rate of year-on-year inflation, as measured by the Colombo Consumers' Price Index (CCPI) (2006/07=100), computed by the Department of Census and Statistics, decreased to 4.9 percent in December 2011 from 6.2 percent in January 2011 and the annual average rate of inflation recorded 6.7 percent in December 2011 thus stabilising the inflation at the mid single digit level.

The year-on-year core inflation, which is computed by excluding the items of fresh food, energy, transport, rice and coconut from the CCPI basket, also declined reaching 4.7 percent in December 2011. The annual average core inflation reached 6.9 percent by the year end.

The contribution to the annual average increase of 6.7 percent in the Index came mainly from price increases in the sub category of Food and non alcoholic beverages (8.8 percent).

Meanwhile, average prices in the sub categories of Housing, water, electricity, gas and other fuels (4.3 percent); Transport (7.1 percent); Clothing and footwear (13.4 percent); Furnishing, household equipment and routine household maintenance (4.6 percent); Health (2.7 percent); Education (3.5 percent); Miscellaneous goods and services (3.9 percent); and Recreation and culture (5.5 percent) increased compared to the previous year. However, the prices in the sub category of Communication remained unchanged during the year.

Increases in prices of locally produced agricultural and other food commodities, especially of vegetables were significant in the first three months of the year, due to both crop destructions and transport disruptions that occurred owing to the flood situation which prevailed in major producing areas.

Although this situation was temporary, inflation on a year-on-year basis continued to increase until it peaked in April and then decreased with the improved supply conditions. The increase in prices of imported food commodities such as wheat flour and milk powder in the international market led to the increase in the food sub index and thereby the CCPI. The upward price revisions of diesel, petrol, kerosene, LP gas and bus fares effected during the reference period also contributed both directly and indirectly to inflation.