Prices of most food items decrease

COLOMBO: Prices of most food items declined due to the increased supply in both local and international markets and the implementation of the Government’s programme to stabilise the prices of 10 essential food commodities during the latter part of the month, the Central Bank said yesterday.

In a release on the Colombo Consumers Price Index (CCPI) the Bank said: “The retail prices of most varieties of rice declined over the previous month due to lower paddy prices as a result of increased supply of Maha harvest. Prices of vegetables further dropped on account of high stocks, which arrived from major producing areas.

This was reflected in the monthly decreases of the vegetables sub index by 8 per cent and 10.8 per cent in February and March, 2007. The retail prices of sugar declined in response to the low prices prevailing in the international market as a result of increased harvest in the two main producers viz. Brazil and India, in response to the favourable weather conditions.

However, these price decreases were offset to some extent by the price increases of bread, wheat flour, fresh fish, prepared foods and meat. On account of limited supply, prices of most varieties of fresh fish increased in a range of 4 -16 per cent.

In addition, price increases of certain items in the clothing, fuel and light and miscellaneous sub groups reduced the intensity of the decline in the overall index during the month.

On a point to point basis, the CCPI rose by 19.5 per cent in March 2007 compared to 6.4 per cent in the same month of the previous year. Accordingly, the annual average of the index also recorded an increase of 16.8 per cent. The highest contribution to the overall increase came from food commodities, which rose by 21.1 per cent in March 2007.

Prices of both domestically produced and imported food items increased on a point to point basis, consequential upon the build up of price pressure due to combined effects of increased transportation expenditure following high fuel prices and disturbances in distribution due to adverse security developments in the Northern and Eastern provinces.

Among the domestically produced food commodities, rice, vegetables, eggs, most varieties of fresh fish, meat and coconut which have significant weights in the CCPI basket recorded price increases. Retail price of rice rose by about 41 per cent, prices of fresh fish rose in a range of 15 - 42 per cent and eggs and coconut prices rose by around 59 per cent and 7 per cent, respectively.

The increase in vegetable prices was in a range of 4 - 36 per cent while prices of meat rose in a range of 16 - 56 per cent. The high import price of wheat grain raised the prices of wheat flour and bread by about 37 per cent and 38 per cent, respectively. Among the other major imported food commodities, the price increases of milk food (4 %- 13%), dhal (20%) some varieties of condiments (17% - 51%) too made a significant impact on the increase in the food sub index.

The core inflation, which is the part of overall inflation sensitive to monetary policy and measured after excluding items with high price volatilities and administered prices increased to reach 18.6 per cent on point to point basis in March, 2007.

The inflation projections indicate that the general price level would decline on a point to point basis from April, 2007. A favourable influence is expected on inflation as a result of persistently tight monetary policy as the growth in reserve money has been kept within the limit in the first three months of 2007.

The fluctuations of price levels are expected to narrow down, with the Government’s effort to stabilise prices of certain essential commodities, especially during the festive season.”