Consumers felt a price increase of 3.56 percent
PPI: From a deflationary trend in the second quarter of the year, the price of goods and services, from producers’ perspective, has increased by 2.53 percent in the third quarter.
This means that local producers experienced an inflation of 2.53 percent in the third quarter this year compared to the third quarter last year, National Statistics Bureau’s (NSB) quarterly producer price index (PPI) revealed.
However from a consumer’s perspective, as recorded by the consumer price index (CPI), the price of goods and services increased by 3.56 between October last year and October this year.
While PPI or the ex-factory price is the price at which producers sell goods to wholesale dealers, CPI or the retail price, measures changes in the price level of a market basket of consumer goods and services purchased by households. It however includes price change for both domestic and imported goods.
PPI in Bhutan only covers domestically produced goods and services, and the sectors include logging, mining and quarrying, manufacturing, utilities (electricity and water), transport and communication sector.
While there was a strong relation between PPI and CPI, a NSB official said in Bhutan’s case, the relation was not very convincing because the country doesn’t produce much.
PPI is normally the lead indicator of inflation, but since most goods and services are imported, except for utilities like electricity, water supply and communications, it does not drive the overall inflation in the country.
The price of goods and services for domestic producers increased by 2.40 percent in July; 2.65 percent in August and 2.55 percent in September compared to the same months last year.
But during the same period consumers felt a corresponding increase in price by 3.44 percent, 3.10 percent and 3.14 percent respectively.
The logging sector contributed significantly to the overall increase for the producers with an average monthly increase of 17.04 percent.
While mining and quarrying sector recorded an average increase of 3.96 percent in these three months, the manufacturing sector noted an average decrease of 3.36 percent.
There was no change recorded in the electricity and water supply. Transport sector increased by 10.45 percent on an average and Information and Communication sector stabilized at around 0.05 percent in all three months.
As for the consumers, price of food went up by 2.86 percent and non-food by 4.03 percent. The prices of domestic goods and services increased by 4.74 percent and imported goods increased by 2.51 percent.
Meanwhile, the CPI is also highly dependent on elasticity of goods and services. It is considered to be highly elastic, if a slight change in price leads to a sharp change in demand or supply.