December 2010 CPI

The report’s been out a couple of days now, and it’s all about the pain (log annual and monthly changes; 2000=100):

Things are, so to speak, back to normal. While the price hike in petrol in December was relatively minor (5 sen increase for RON95 petrol and diesel, 15 sen for RON97), there’s been an obvious bump up in transportation costs (index numbers; 2000=100):

There’s been few second order effects so far, though I won’t hazard a guess on how long that will last – I suspect the year end sales have capped price increases for now. There’s also the further hike in RON97 (and kerosene) prices in January by 10 sen, though the impact of that will be muted compared to the price increase in the much more widely used and cheaper RON95.

For the rest, there’s not much to look at, as food price increases moderated, and core prices remained fairly flat. There’s an expectation that further subsidy rationalisation would drive inflation higher this year. I won’t argue the point, but I don’t think a repeat of 2008 is on the cards, as price hikes are in more manageable chunks and less likely to trigger a response in supply chain prices. I’m reminded here of the story of the frog in hot water – heat the water slowly enough, and the frog will slowly boil to death instead of jumping out. Hmmm, maybe not the happiest imagery to conjure up.

Technical Notes:

December 2010 Consumer Price Index Report from the Department of Statistics