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Drop in COL due to increased supply of consumer goods

by Chamitha Kuruppu

The seasonal drop in consumption has led to a reduction in food prices.

The Central Bank of Sri Lanka and Department of Census and Statistics have indicated that the Cost-of-living index has come down during February.

The cost-of-Living Index records a decrease of 1.1% in February compared to January. A statement issued by the Department of Census and Statistics said that the Colombo Consumers' Price Index (CCPI) for February was 3423.1 which is a 38.4 decrease when compared to the index of 3461.5 in January.

The Colombo District Consumer Price Index (CDCPI) computed by the Central Bank (CBSL) of Sri Lanka decreased by 0.1% in February.

On a point to point basis, the index decreased to 4.0% from 5.2% in January. The annual average change of the index, declined to 6.1% compared to 6.5% last month. Chairman of the Cooperative Wholesale Establishment(CWE) Lal Wickremetunga told the Daily News that the consumption has gone down after the festive season and attributed it as the foremost reason for the decrease.

Wickremetunga said that the drop in consumer prices after the festive season specially vegetables are a significant factor. He said that since the paddy harvest is also coming in, consumer prices will reduce further. Development in the index will continue till April, he said. The decrease in the post harvest loss due to storage and transport facilities has also contributed to this move.

Senior Research Fellow of the Hector Kobbekaduwa Agrarian Research and Training Institute L.P. Rupasinghe said this is a 'general trend' which was experienced over the past years.

He said that 70% of the index comprises food prices and a drop in consumer prices will lead to such a development.

Every year index prices are unusually high in January due to the festive season. The commencement of the harvesting season and declining trend of consumer prices will lead to a drop in the cost-of-living from February till April, he said. "The cost-of-living might come down but with the paddy harvest coming in the farmers will start complaining," Rupasinghe said.

The Census and Statistics Department said that this is mainly due to the decrease in the prices of rice, limes, red onions, cowpea, coconuts, eggs, potatoes, most varieties of fresh fish and most varieties of vegetables. The department said that the price decreases in food items can be mainly attributed to the increased supply of consumer goods to the main markets in Colombo.

The CBSL said the main contributory factor for the decline was the food category. Most varieties of vegetables, lime, onions, certain varieties of fruits, eggs, a few varieties of fish, potatoes, condiments, rice, chicken, coconut oil and arecanut recorded price drops during the month. Industrial sources told the Daily News that there was a drop in vegetable and fruit prices during the last month but did not agree with the fact that there is a drop in the cost-of-living.

Prices of most essential services such as gas, electricity and telephone are increasing daily, sources said. The CCPI is the official measure of price changes within the Colombo Municipality for lower income groups published by the Department of Census and Statistics. The Central Bank of Sri Lanka said that the index in February this year when compared to February last year increased by 11.0%, which was lower than 13.6% seen in January 2003.

The annual average increase of the index has risen to 10.2% from 10.0 percent in January this year.

The cost-of-living index is considered as an important indicator as the cost-of-living allowance is prepared according to this.

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