March headline inflation drops substantially to 0.9%

Soaring prices in the past couple of months led to a fall in demand for vegetables. Pic by Kithsiri de Mel 

• CCPI for all items records 196.7
• YoY Food group inflation increased to 3.8%
• YoY Non-Food inflation decreased to 0.5% 

Headline Inflation, as measured by the Colombo Consumer Price Index (CCPI), dropped to 0.9 percent in March 2024 from 5.9 percent in February, data from the Department of Census and Statistics (DCS) showed.

The CCPI for all items for March 2024 was 196.7, which is a decrease of 3.9 index points compared to February 2024, for which the index was 200.6. The expenditure value decreased by Rs. 3,576 in the ‘Market Basket’.

The Year-on-Year (YoY) inflation of Food Group increased to 3.8 percent in March 2024 from 3.5 percent in February 2024 and the Y-on-Y inflation of Non Food Group decreased to 0.5 percent in March 2024 from 7.0 percent in February 2024.

The contribution of inflation by food commodities was 1.19 percent while the contribution of Non-Food items was -0.32 percent.

As per the data, this to the price decreases in groups of housing, water, electricity, gas and other fuels, transport, health, clothing and footwear, furnishing household equipment and routine maintenance, as well as the price increases in groups of alcoholic beverages, tobacco and narcotics, education, restaurants and hotels, miscellaneous goods and services, recreation and culture and communication, compared to March 2023.

Meanwhile, the month-on-month change was contributed by a decrease in Food items by 0.66 percent and Non Food items by 1.28 percent.

The Central Bank this week said inflation would stay in line with the 5 percent target for the next 12-18 months.

Compared to previous projections, headline inflation is anticipated to moderate in the forthcoming months, as the effects of the temporary uptick in inflation driven by the VAT amendments are expected to be partly offset by the recent downward revision to the electricity tariff and the moderation in food prices.

Inflation is expected to eventually converge to the targeted level in the period ahead and remain around the target over the medium term, supported by appropriate policy measures, the Central Bank said.

Since last year, the Central bank reduced policy rates by 700 bps in total to help the island nation's economy return to growth.

In September 2022, Sri Lanka saw its inflation reach to the highest level here it expanded to 70 percent due to the severe mismanagement of the economy, resulting in the worst crisis in history.

The CCPI is compiled to indicate average changes in prices of goods and services purchased by households in urban areas of Colombo district. The price collection of the index (Base 2021 = 100) has covered 10 price collection centers; Peliyagoda, Maradana, Wellawatte, Dematagoda, Grandpass, Kirulapone, Nugegoda, Rathmalana, and the Narahenpita, and Rathmalana Dedicated Economic Centers.