The consumer price index (CPI) or year-on-year inflation in March, which is the period between March last year and March this year, was recorded at 2.98 percent, down by 0.03 percentage point compared to February 2019.

This means that the prices of goods and services have increased by 2.98 percent in March this year compared to the same month last year.

The year-on-year inflation for the first three months this year is even lower than the average annual inflation last year, 3.13 percent, which is an all- time low figure. The year-on-year inflation in January was recorded at 3.12 percent and 3.01 percent the following month.

According to figures from the National Statistical Bureau (NSB), between March last year and March this year, prices of local goods and services increased by 3.44 percent. Imported goods and services recorded an increase at 2.55 percent.

The NSB has identified a sample of goods and services representative of all goods and services purchased by the households called market basket, containing 151 items of 436 varieties.  The bureau has further classified these items into 12 major groups.

Within this group, transport recorded an increase in the price with 5.14 percent between March last year and this year. This can be attributed to increase in price of vehicles.

Restaurant and hotel services recorded an increase of 6.39 percent.

In the non-food group, catering services experienced a price rise of 6.65 percent, followed by telephone and telefax equipment at 5.17 percent.

Within the food group, the price of fish increased by 7.20 percent within the 12-month period, followed by meat at 4.71 percent.

Since inflation erodes the purchasing power of ngultrum (PPN), as of March this year Nu 100 is worth only Nu 73 in December 2012.

When the prices of goods and services increase, the purchasing power of ngultrum drops, which economists define as inflation.

From 8.8 percent in 2011, inflation hit an all-time high of 11 percent in 2012. After a persistent figure of about 8 percent for the two successive years, it dropped to 4.58 percent in 2015. This was on the back of rupee shortage, which was followed by credit and import restrictions.

However, economists say that lower inflation does not translate into a decrease in the price of commodities. It means the prices of goods and services are increasing at a slower rate than before.

Food commodities, transport, including fuel prices and housing and electricity are attached more weights for the sake of determining inflation.

Weights reflect the relative importance or contribution to the total consumption expenditure of all households. It is determined using the spending patterns of households based on the living standard survey. The more current the weights, the more reflective they are of current consumer spending patterns.

Price inelastic goods, like fuel and rice are attached more weights because despite the change in price of such goods and services, the demand and the supply is unlikely to be affected.

Tshering Dorji


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