Inflation rate continues deceleration path

Inflation, which began a deceleration from July, 2008 continued on the same path for the third consecutive month for September, 2008.

As measured by the Colombo Consumers’ Price Index (CCPI), inflation on a year-on-year basis recorded 24.3 per cent in September, 2008 falling further from 24.9 per cent recorded in August, 2008.

However, the monthly Index recorded a slight increase of 0.4 per cent over the previous month, raising the expenditure value of the index by Rs. 166.61, while the annual average inflation rate moved from 22.6 per cent to 23.2 per cent between the two months, reflecting the cumulative effect of the increase in the Index during the preceding 12 months period.

The Food sub index recorded a decrease of 0.3 per cent in September over the previous month, mainly due to the decline in prices of fish, coconut and coconut oil, vegetables, meals bought from outside, meat and pulses consequent to the increased supply of domestic agricultural produce.

This had a significant impact on the overall inflation as it accounts for 47 percent of the total index. However, the total impact of this decline on the overall price level was offset by the increases in non-food categories mainly transport, health, miscellaneous goods and services, and food and non-alcoholic beverages.

The increase in LP gas prices by the beginning of the month also is attributed to the increase in inflation.

Meanwhile, the core inflation, which is derived by excluding food and energy items from the CCPI basket to reflect price changes that are more responsive to demand factors, rose by 1.1 per cent in September over the previous month, registering an annual average of 11.1 per cent and a point-to-point change of 18.7 per cent compared to 10.1 per cent and 17.4 per cent, respectively in the previous month.