• Deflation widened sharply to an eight-month high in February (-1.2% YoY; consensus: -0.2%; Jan: -0.3%)
  • MoM (-0.9%; Jan: 0.1%): prices fell for the first time in five months.
  • Core inflation (0.0%; Jan: 0.2%): muted inflationary pressure, matching a nine-month low.
• The steeper deflation was primarily led by prices of the non-core items
  • Housing & furnishing (-5.0%; Jan: -0.3%): marked the largest fall in nine months as the government provided subsidies for electricity and water bills in February and March.
  • Food & non-alcoholic beverages (-0.4%; Jan: 0.6%): slipped into deflation for the first time since Feb 2018 on lower prices of vegetables (-4.3%; Jan: 9.7%) amid easing drought conditions.
  • Transportation & communication (1.0%; Jan: -1.9%): rebounded to register the first inflation in 13 months in line with the surge in global oil price (USD62.28/barrel; Jan: USD54.77/barrel).
• Higher inflation trend across advanced and developing regions
  • KR (1.1%; Jan: 0.6%): surged to its highest in over a year, driven by higher oil and food prices amid increased demand during the Lunar New Year holiday and shortages of eggs due to the spread of avian influenza.
  • Euro area (0.9%; Jan: 0.9%): remained in the positive territory, supported by the elevated energy prices.
• 2021 CPI forecast range kept unchanged (0.7 – 1.3%; 2020: -0.8%)
  • Prices may remain pressured in March on the continuation of the utility bills subsidies. Afterwards, inflation is expected to rebound due to the lower base in the preceding year, extended fiscal support, spike in energy prices and the relaxation of COVID-19 restrictions.
  • The Bank of Thailand (BoT) is expected to stand pat on policy rate (0.5%) underscored by the prospect of economic recovery amid the ongoing vaccination drive.

Source: Kenanga Research - 9 Mar 2021