Recovery Green Shoots Salad : producers told to freeze their prices… for 3 months

Ironic beauty of the thai political system : Thaksin ? The Junta ? Samak ? Somchai ? Abhisit ? Different views and bitter political feuds ?

Bullshit.

The same lunatics, the same family, as far as the economy is concerned.

Let’s take the latest example. The current (ah ah ah) Commerce Minister (check here for her impressive background)

“Although the economy is already beginning to recover, this is not the right time to adjust the product prices yet because it would increase people’s spending burden,” Mrs Portiva said.

“I would like the producers to freeze their product prices for at least three more months to maintain the inflation rate at 3.5 to four per cent.” [...]

Mrs Porntiva said her ministry would ask the cabinet to watch price movements of 40 items under the goods and services control programme plus more than 200 other items on a special watch list to prevent manufacturers from raising prices unnecessarily to the public detriment. (Bangkok Post)

It’s a cut and paste of the inane and short sighted policies designed by Samak, during the Great Inflation Fear (in 2008, remember with peak oil prices at 140 USD in july 2008) ?

Miss Porthiva is as stupid as her predecessors (check my inflation category in 2008, it was a true festival at that time, read here and there and here).

What’s the point to save “3 more months” ? Oh yeah… you remember, we are supposed to endure scary political fightings before april ? How convenient.

Anyway. Porthiva should stop talking, and should stop mixing economy with cheap politics and with issues she obviously doesn’t understand.

She wants  more prices controls ? Sure, have a look at Venezuela. Same causes will lead eventually to the same effects.

Anyway 1 year and a half after the fall of Samak, and after a deep economic crisis, the so called Abhisit government is doing exactly the same than their alleged political opponents :

-stimulus, subsidies
-free programs, hands outs
-mega projects as red herrings
-prices controls

etc. It’s easy : take the headlines of newspapers and just change the names of the so called ministers.

Oh and by the way… It would be interesting to hear some comments from Korn, the smart, young, witty (Abhisit’s buddy) and so modern Finances Minister (of the year !).

How can he look himself in the mirror while the Commerce Minister supports prices controls, like in a good old style soviet country ?

Chart, Producer Price Index : -10 % in june

At last a good negative stat !

The Producer Price Index is down 10,54 % in june, compared to june 2008.

I know… I didn’t speak about CPI and PPI… for a long time.

Regarding the CPI, I said why (here)… And for the PPI, well the trend was too obvious (explained here).

But I feel a little update is necessary.

I wrote in february about PPI :

Due to the base effect, we are going to get in the coming months extremely negative values (in % of difference, year on year)…

This is the -10,54 % we have had in june.

Remember, summer 2008…. the Peak Exports… the Peak CPI… the Peak Olympics…the Peak everything… before the big bubble burst… Oil prices were burning… and were infecting a whole range of products due to higher costs.

Barrel was at 150 USD… And today 70… So of course, PPI is going down, year on year.

The item “Petroleum Products” (8 % within the index) is crashing by 44 %. “Food products, beverages, tobacco” (15,9 % of the index) is down 0,8 %.

Only fools look at those figures with fear : lower prices are good for everybody.

What the fools do not understand is that our modern economy is by essence deflationary… it’s called productivity : we do more with less, therefore “prices” (per unit) should go down.

Only the fools are calling for “inflation” (of prices)… Just to save the current order… Just to save their positions and the banks…

Deflation is good. Deflation favors savings and work.

Inflation is for the messy politicians, the debts lovers, the addicted to bubbles and cheap money.

(Source Bureau of Trade and Economics Indices)

Inflation : PPI at -2,50 % in january

The CPI has been tampered (read my article)… But hopefully they didn’t mess up with the PPI (Producer Price Index).

In january, PPI was at 143,2 points, a decrease of 2,52 % compared to january last year…

But compared to december, the PPI increased by 0,7 %.

Due to the base effect, we are going to get in the coming months extremely negative values (in % of difference, year on year)… because last year we had extremely high values.

This is why it will be more interesting to focus on the evolution month-on-month, along with the details (we all know for instance that prices of products related to oil are crashing… it’s not really an information. But wholesale prices for crops are still 8,1 % higher compared to january last year etc.).

(Source Bureau of Trade and Economics Indices and details of the report)

Inflation, CPI : bravo, they broke the thermometer

Thailand’s inflation in January fell marginally by 0.4 per cent year-on-year, its first decline in more than nine years, according to Siripol Yodmuangcharoen, Permanent Secretary for Commerce. (TNA)

Bravo Thailand ! Right in the middle of a full blown crisis, the stupid bureaucrats had a great idea : to change the thermometer of inflation…

When they started to talk about it, I didn’t believe them. But it’s done.

For the CPI report of january, they have changed the base year for the calculation of the index… (from 2002 to 2007) and they have changed (this is much worse) the relative weight of each item.

For instance :
BEFORE : Food and beverage = 36 % of the index
AFTER : Food and beverage = 33,01 % of the index

BEFORE : Transportation and communication = 21,98 %
ATFER : Transportation and communication = 26,80 %

The result ? Since oil prices are crashing… and since the transportation item has more weight… the effect on the total CPI is greater… AKA inflation rate is going down… more with the new system, than with the old one.

Double whammy with food : food prices are still high compared to last year… but this group has less weight in the new index, therefore the effect on the CPI is mechanically reduced.

Convenient for the clowns, huh ? !

Hopefully, ThaiCrisis is aware. And is watching.

Here is the new serie, with the old one. A red dot on the lines that have changed… All of them… excepted 2 items…

I mean, if they were serious they should give (at least during a few months) the old calculation along with the new calculation, or an Excel file with all the data, so we could do it ourselves.

But better to blind people.

I can’t use my chart anymore, we can’t make forecast using the readings of the previous months to anticipate the year on year difference in %, we can’t make comparison on a long time scale.

(Source Bureau of Trade and Economics Indices)

Inflation, CPI: +0,4 % in december and +5,5 % for the year

Consumer Price Index reached 119,5 against… 119 in december 2007. Therefore, it’s an increase of 0,4 %.

For the whole year, inflation rate is 5,5 %.

The Bangkok Post writes : “December inflation hit 76-month low”.

It’s of course misleading… Base effect and the sharp drop of oil prices and the subsidies (since august, free water, free electricity, subsidy on diesel etc.) explain this result.

But if we look at the details… we see that the group “Food and Beverage” (with a weight of 36 % in the index) has increased by 13,9 % year on year.

“Electricity, fuel, water supply” (5,10 % of the index) plunged by… 37,3 %.

For that matter, it’s easy to forecast a negative inflation rate (particularly on Q2 of 2009).

The good news is the sharp fall of PPI (producer price index).

(Source Bureau of Trade and Economics Indices)

Chart, inflation : CPI and PPI drop in november

Okay folks, back to business. Enough of talking about airports !

Consumer Price Index and Producer Price Index reports for november have been published (source Bureau of Trade and Economic Indices).

The CPI slowed to +2,2 % (year on year = compared to november 2007), from +3,9 % the previous month.

For the PPI the fall is even more spectacular : 1,86 %, against 8,47 % in october !

Why ? How ? There is only one reason : the crunch of oil prices.

But if we look at the details of the CPI report, we see :

-the group “Food and beverages” (= 36 % of the index) has increased… by 15,4 % in november compared to november 2007… And it has even increased by 1 % between october and november (month-on-month).

So watch out : yes the inflation pace is droping like a stone, thanks to energy prices. Drivers are happy. But the prices of food are still high. Much higher than one year ago.

-another group “Housing and furnishing” (= 23,86 % of the index) is droping big time year-on-year (-7,7 %) thanks to the sub-group “electricity, water”… But it’s artificial thanks to the “Samak rescue package” end of july (tax cut on diesel, free water and free electricity, read here). It won’t last.

Chart, inflation october : CPI at +3,9 % and PPI at +8,5 %

Consumer Price Index and Producer Price Index reports for october have been published (source Bureau of Trade and Economic Indices).

Good news : the pace of inflation is decreasing.

CPI = +3,9 % compared to october 2007
PPI = +8,5 % compared to october 2007 (spectacular drop, from +19 % in september !)

That’s a good news indeed. Particularily on the PPI front.

But if the % of inflation, the pace, is declining year on year, compared to the previous months… it’s important to remember that prices remain… high in absolute values.

Here is the CPI with values and % of change.

We have some margins before to see a real deflation, AKA a general fall of prices…

Commerce Ministery discovers the perverse effect of prices controls policy

The commerce minister plans to ask local business operators to cut retail product prices to go in line with the recent and continued falls in the world oil price.

Commerce Minister Chaiya Sasomsap has instructed the Internal Trade Department to keep a close watch on consumer goods prices after the world crude price has fallen drastically in recent days. [...]

Internal Trade Department Director-general, Yanyong Phuangrach said the department will continue discussing price cuts for other consumer goods, although he admitted that the possibility of cheaper goods is smaller as the Commerce Ministry capped prices for a number of products when the oil price was high. (TOC)

The clowns of the Commerce Ministry have just discovered that water is… liquid !

Prices controls are good when the prices are supposed to go up… But when the prices are supposed to go down… well… they won’t… because they have been… capped.

Bravo, congratulations to the bozos !

Chart, inflation : CPI at 6 % and PPI at 19,4 % in september

Consumer Price Index and Producer Price Index reports for september have been published (source Bureau of Trade and Economic Indices).

Growth of CPI (Consumer Price Index) reaches +6 % (year-on-year = compared to september 2007), against 6,4 % in august, and 9,2% in july.

(To understand the fall between july and august, you have to read this article… This drop is partly artificial.)

PPI (Producer Price Index) are still very high at +19,4 %. It means businesses are still facing pressures on their costs.

Now, I can hear the suckers : “You see 6% versus 6,4 %, inflation went down between august and september !”.

Nope. We have a decrease in % but… an increase in points (from 124,2 to 124,5). How come ? Base effect that’s all.

But of course the suckers (and the journalists) look only at the %, like the chinese proverb : When a finger points to the moon, the imbecile looks at the finger.

Here is a chart with both values.

So let’s summarize :

-the feel good operation from the government started end of july (free water, free electricity, tax cuts on diesel etc.). It will end in january.

-the powerful (and real) effect of the decrease of oil prices on the CPI… is already BEHIND us… It’s unlikely that oil prices will fall further… Therefore, we have already eated our white bred… This card won’t have an effect anymore on the CPI for the coming months.

-meanwhile, some prices will continue to raise, because the PPI are still very high (every month, companies have to give up the fight, and have to increase their own prices, they can’t postpone anymore). This will fuel the CPI for the coming months.

-looking at the details of the CPI report we see that “food and beverages” is up 15,7 % compared to september 2007 ! And up 1,7 % compared to august 2008. This inflation is broadly felt by the population, for obvious reasons… And reduces the purchasing power.

-but because of the base effect (comparison year-on-year), the % of change of the CPI could continue to go down (for instance with the same index reading at 124,5 points in october, the % of change would be +5,2 %).

-the only factor that could cool off the CPI seriously is a severe slowdown (exports for instance are going to slow down, that could fuel prices decreases). We’ll see.

-last point : let’s not forget the exchange rate issue… If the THB is going down versus USD and EUR, we are going to import inflation.

Details about the “drop” of inflation in august : manipulation

Hurrah ! Inflation has been defeated (almost) in august, at 6,4 % (year on year = compared to august 2007) from 9,2 % in july.

Look at the headlines : “Easing oil prices help push August inflation down to 6.4%“

Look at the chart.

We can almost hear some people : the crisis is over.

Of course it’s not.

Let’s have a look a the details of the CPI, to understand the miracle.

This is the composition of the “basket” to calculate the CPI, with the different items (groups) and their relative weight.

We can see that the groups “Housing” and “Transportation” are responsible for the fall (-9 and -7 % compared to the previous month).

But then we can look the details of the groups, and then the details of the sub-groups…

In yellow the proof of the manipulation :

-price of electricity is supposed to have dropped by 37 % in 1 month !
-water : -59 %

-public transportations : -4,5 %

etc. All the other groups increased a little bit (like Food Beverages +1,7 % in one month).

The manipulation is obvious : the (real) decline of fuels prices has been leveraged by the artificial “special package” decided by the government end of july (read here) : tax cuts, free electricity and water for small users (poor households), free rides on bus and trains.

It’s a joke. And this joke will last only 6 months…

What will happen after, mechanically ? A strong increase of the CPI.

Chart, inflation, august : CPI at +6,4 % and PPI at +21,5 %

Consumer Price Index and Producer Price Index reports have been published for august (source Bureau of Trade and Economic Indices).

CPI went down from 9,2 % in july to 6,4 % in august year-on-year (at 124,2 points).

Miracle of oil prices going down and the Zimbabwean prices controls policy and the “tax cuts” on diesel and other goodies given by the government for… six months (free electricity, free water, free bus rides etc).

Meanwhile the PPI went down too, albeit modestly (from 170,1 in july to 166,3 points in august) , but because of base effect, the percentage year-on-year is higher (21,5 % in august, against 21,2 % in july).

Don’t be fooled. The decline of the CPI is a fiction, a gross manipulation (I’ll elaborate tomorrow).