Inflation moderates in July

Inflation, moderated further to 4.7 percent in July 2014 from 4.9 percent in June 2014, on an annual average basis, declining for the fourteenth consecutive month, a Department of Census and Statistics release said.

Year-on-year (YoY) inflation has been maintained within benign single digit levels so far in 2014, although it increased to 3.6 percent in July 2014 from 2.8 percent a month earlier, as a result of price increase of food items. Overall, stable prices of items in the non-food category helped to contain inflation at a low level in July 2014. Within this category, prices of items in the sub group of housing, water, electricity, gas and other fuels declined while that of miscellaneous goods and services increased.

Prices in all the other sub groups, such as clothing and footwear; furnishing, household equipment and routine household maintenance; health; transport; communication; recreation and culture; and education remained unchanged during July 2014, compared to the previous month.

The increase in prices of items in the food and non-alcoholic beverages sub-category was the main contributor to the monthly increase (1.0 percent) in the CCPI (Colombo Consumers Price Index).

Within the Food category, drought conditions that prevailed in major producing areas caused average prices of many varieties of vegetables to increase.

Due to seasonal factors, prices of many fresh fish and dry fish varieties, eggs, big onions and green chilies also increased.

Nevertheless, prices of several varieties of fruits declined. Core inflation, which is responsive to changes in aggregate demand, increased slightly in July 2014 compared to the previous month.

Accordingly, core inflation, on a YoY and annual average basis, increased to 3.7 percent and 3.1 percent in July 2014 from 3.5 percent and 3.0 percent in June 2014.