Lanka’s annual average inflation 6.9 % in 2013

Sri Lanka’s annual average rate of inflation decelerated to 6.9 per cent in December 2013, for the seventh consecutive month, the Central Bank (CB) said on New Year’s Eve.

The contribution to the decline in annual average inflation to 6.9 per cent in 2013 came mainly from slowdown in the price increase in the Non-food category, which grew only by 6.1 per cent in 2013 against that of 10.0 per cent in 2012.

Meanwhile inflation, which was contained within single digit levels for nearly five consecutive years, decelerated significantly to reach ‘ benign’ mid-single digit levels in December 2013, the CB said, noting that “this is the longest period that inflation has remained at single digit levels, after the economy was liberalized”.

Year-on-year headline inflation, as measured by the Colombo Consumers’ Price Index (CCPI) fell to 4.7 per cent in December 2013 against 9.2 per cent in December 2012, improving business and investor confidence. It was the lowest level recorded since March 2012.

The CB statement said that the impact of the upward price revision of petrol, diesel, kerosene and bus fares on inflation was lower in 2013 than in 2012. As a result, the average price in the Transport sub- category increased only by 4.6 per cent. In addition, comparatively lower increase in the average prices in the subcategories of Health ( by 1.7 per cent); Furnishing, Household equipment and routine household maintenance ( by 4.0 per cent); and Clothing and footwear ( by 5.4 per cent) in 2013 than in 2012 contributed favourably to this decline. However a relatively high increase in the Food and non- alco- holic beverages category by 7.9 per cent in 2013 compared to 2012 had an upward pressure on inflation.

“Core inflation, which captures underlying longterm trend of inflation, also moved on a declining path in 2013 to record the lowest figure since its inception in 2007. The yearon year core inflation has declined steadily, reaching its lowest at 2.1 per cent in December 2013 compared to 7.6 per cent in December 2012. The annual average core inflation also continued to decline since mid- 2013 and reached 4.4 per cent by December 2013. This favourable development is a reflection of the effectiveness of prudent demand management policies of the Central Bank which have been implemented successfully in containing price pressure emanating from the demand side,” the CB statement noted.