Inflation in Colombo rose sharply in March compared to February, as the food prices continued their climb while the government scrambles to keep the prices of essential food items in check.
According to the inflation measured by the Colombo Consumer Price Index (CCPI), the headline inflation in the metropolis rose by 4.1 percent in the 12 months to March 2021, jumping from 3.3 percent in February.
The non-food inflation too closely followed suit, as people return to their normal course of lives as the virus recedes in a telltale of that it could be a serious economic caveat the government will have to deal with, if the prices continue on the current path. The so-called core prices measured barring often-volatile food and energy prices also rose by 3.1 percent from a year ago, accelerating from 2.6 percent in February.
However, the headline inflation is still hovering near the lower bound of the Central Bank’s 4 to 6 percent mid-tier target set for the medium term. Hence, the overall prices in the economy have still not reached a level where it warrants a policy response from the
Slightly higher food prices are not atypical just prior to the New Year, as the demand escalates ahead of April as people get ready to celebrate their largest cultural event of the year.
However, the rise in food prices by 9.6 percent in March year-on-year, up from 7.9 percent in February should certainly unsettle the authorities, as people are now forced to spend 10 percent more for the same basket of goods than what they spent a year ago.
The situation gets further aggravated when people have no meaningful increase in their incomes or salaries during the last year, as businesses held off increments and other bonuses in most places while the self-employed and small and medium enterprises are still struggling to keep their heads above the water after the pandemic pushed them to a corner.
However, the prices of food items declined 1.6 percent on a month-on-month (MoM) basis as prices of most varieties of rice, sea fish, eggs, coconuts, vegetables, turmeric powder, potatoes, red onions, free chili, lime, tamarind, etc. fell from where they were in February.
The prices of green gram, Samba rice, chicken, papaw, big onions and a few others rose from their February levels. Meanwhile, the non-food prices rose by 1.8 percent YoY in March, from 1.3 percent in February while the MoM prices too followed suit with an increase of 0.5 percent, up from 0.1 percent a month earlier.
In a clear sign of returning to normalcy, all categories under non-food inflation staged an increase. Restaurants and hotels recorded the highest increase, as people now feel safer to take trips to resorts and engage in other leisure and entertainment activities.
Clothing and footwear prices rose as the schools were reopened for all grades, while people also spent on furnishing their households for the New Year.