Non-food items’  contribution to inflation drops by 9 percent

Thukten Zangpo 

The country’s inflation rate rose to 6.54 percent in the last 12 months as of June this year.

This is according to National Statistics Bureau’s latest consumer price index (CPI), released yesterday.

Inflation is the pace at which prices of goods and services are rising over a period of given time.

For example, if a packet of milk costs Nu 100 and the price rises by Nu 5 compared with a year earlier, then the milk’s inflation rate is 5 percent.

The inflation rate in June returned above 6 percent after four months. It is higher than the Royal Monetary Authority’s upper threshold of 6 percent.

The prices of non-food items remain the main contributor, at 62 percent to inflation as of June. It saw a drop from 71 percent from the previous month.

Non-food items contributed 60 percent of the inflation in 2021 because of the rising global fuel price. In 2020, food prices contributed to 90 percent of the overall inflation because of global food supply chain disruptions.

However, the food prices climbed to 5.13 percent in June from 3.52 percent in May. The contribution to inflation also increased to 38 percent from 29 percent.   

Although the transport sector recorded the highest increase with 14.72 percent, contributing to 33 percent of the inflation, food and alcoholic beverages had the highest contribution with 38 percent of the overall increase.

Comparing the inflation of June this year to that of the previous month, it decreased by 0.41 percent because of a decrease in prices of food by 0.93 percent. It was mainly because of drop in prices of vegetables, fruits, and dairy products, mainly eggs.

However, prices of the non-food items saw a minimal increase of 0.02 percent.

The prices of petrol increased, while prices of diesel, liquified petroleum gas (LPG) and Kerosene decreased in June.

The must-needed commodities like fuel, LPG, and rice have been given more weight while measuring the CPI, a slight change or fluctuation in prices could influence inflation rate.

The rising inflation has also eroded the purchasing power of the consumer.

The purchasing power of Ngultrum as measured by CPI was Nu 61 as of June compared to December 2012.  This means Nu 100 was worth only Nu 60 at December 2012 prices.