Inflation tsunami : green light for higher prices for 60 consumer products

People’s pockets are being hit yet again with the Commerce Ministry’s approval of immediate hikes in the price of 60 consumer products because of the rising cost of oil and raw materials.

The decision was announced after talks yesterday.

Manufacturers said they had agreed in March to the ministry’s request to reduce prices by 5-15% for two to six months. However, with the continuing escalation in costs they could no longer afford to cap or cut prices.

Internal Trade Department deputy chief Vatchari Vimooktayon said approval was given yesterday for manufacturers to raise the prices of 60 consumer products in line with the market mechanism. The decision was effective immediately, she said.

In March, manufacturers agreed to cut or cap prices on 60 items. Of these, 15 are powdered milk products and the rest are items for daily use including washing detergent, soap, shampoo and conditioner, toothpaste, toothbrushes, talcum powder, roll-on deodorants and dishwashing liquids.

Ms Vatchari was speaking after meeting representatives of six manufacturers who together control about 90% of the market share – P&G, Lion (Thailand), Colgate, Kao Commercial, Unilever and Saha Pathanapibul.

Prapot Nanthawatsiri, president of the Thai Soap, Detergent and Personal Care Manufacturers’ Association, said most manufacturers have seen their production costs go up by more than 40% because of rising fuel and raw material prices. (Bangkok Post)

Voila. Exactly what I’ve been predicted (by the way, it’s funny to see how Nation reported this meeting… a rather different presentation 😉 ).

I pound the thai authorities for their economic policies, but we need to understand that the problem is much wider. In many countries, we see the same pattern : short term answer to inflation = subsidies and prices controls.

For instance, “Food manufacturers promised Mexico’s government on Wednesday that they would freeze prices on more than 150 food products to help families cope with rising costs. President Felipe Calderon said prices for goods such as beans, canned tuna, fruit juices, coffee, ketchup and canned tomatoes will remain fixed until Dec. 31.” (AP)

In Europe, the french president has had a big success with his idea to cap the VAT on gasoline, etc.

Unfortunatly… this kind of policy can work only on the short term. We see it in Thailand. But look at Malaysia, India and Indonesia too (with massive increases of gasoline prices a few week ago)… And today… China followed ! They have decided to increase gasoline by 17 % !

You don’t have to go to Harward Business School this week end… This strong push of energy prices in China… will fuel more inflation, in a cascade of spillovers effects, like gasoline onto a fire.

The inflation tsunami is on the move : nothing can stop it at this stage.

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Thailand Crisis

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But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.


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