𝐈𝐧𝐟𝐥𝐚𝐭𝐢𝐨𝐧 𝐒𝐮𝐫𝐠𝐞𝐬 𝐀𝐦𝐢𝐝 𝐇𝐢𝐠𝐡𝐞𝐫 𝐅𝐨𝐨𝐝 𝐏𝐫𝐢𝐜𝐞𝐬, 𝐄𝐫𝐨𝐝𝐢𝐧𝐠 𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐢𝐧𝐠 𝐏𝐨𝐰𝐞𝐫

…𝒇𝒐𝒐𝒅 𝒊𝒏𝒇𝒍𝒂𝒕𝒊𝒐𝒏 𝒉𝒊𝒕𝒔 𝒏𝒆𝒂𝒓𝒍𝒚 5%, 𝒘𝒉𝒊𝒍𝒆 𝒏𝒐𝒏-𝒇𝒐𝒐𝒅 𝒑𝒓𝒊𝒄𝒆𝒔 𝒅𝒓𝒐𝒑; 𝒑𝒖𝒓𝒄𝒉𝒂𝒔𝒊𝒏𝒈 𝒑𝒐𝒘𝒆𝒓 𝒅𝒆𝒄𝒍𝒊𝒏𝒆𝒔 𝒂𝒎𝒊𝒅 𝒓𝒊𝒔𝒊𝒏𝒈 𝒄𝒐𝒔𝒕𝒔

By Tshering Yangden

The latest Consumer Price Index (CPI) data for November 2024 reveals that country’s inflation rate has increased to 1.87% year-on-year, up from 1.34% in October 2024. This uptick signals a growing strain on household budgets, particularly driven by higher food prices, which have been the key contributing factor behind the overall inflation trend. In contrast, non-food inflation experienced a decrease in the same period, signaling a mixed outlook for consumers.

According to the CPI report, the national inflation rate from January to November 2024 has averaged 2.91%. Food prices were the major driver of this inflationary pressure, highlighting the strain on household budgets, as the cost of essential food items rose sharply during the year.

The most notable change in November 2024 was a steep rise in food inflation, which reached 4.92%. This is a substantial increase from previous months and reflects a broader trend of rising food prices. The Food & non-alcoholic beverages index, one of the most important sub-categories of food, saw an increase of 5.48% year-on-year. This increase is largely attributed to the seasonal variations in food supply and higher demand, as well as global supply chain disruptions that continue to affect food prices.

However, not all food categories contributed equally to the overall food inflation. While food and non-alcoholic beverages became significantly more expensive, alcoholic beverages and betel nuts experienced a price drop of -1.71%. This decline in prices for alcohol-related items likely had a mitigating effect on the overall food inflation figures, preventing the inflation rate from rising even higher.

Despite the price increase in food items, non-food inflation saw a contrasting trend, dropping to -1.12% in November 2024. This decrease was largely driven by sharp declines in key non-food categories, particularly housing and utilities, health, and transport. The housing and utilities index decreased by -0.89%, health-related services saw a decline of -0.45%, and transport costs dropped significantly by -7.15%. This indicates a reduction in overall living costs outside of food, providing some relief to consumers in these sectors.

Turning to month-on-month figures, inflation in November 2024 increased to 0.75%, slightly higher than the 0.65% recorded in October 2024. This represents an uptick in the rate of inflation over the previous month and is reflective of increases in both food and non-food prices during the month.

Within the food category, the month-on-month food inflation reached 1.38%, driven primarily by a rise in the Food & non-alcoholic beverages index, which rose by 1.49%. This increase in food prices is likely due to seasonal changes and the continued challenges in the global supply chain that have made food more expensive in recent months.

Non-food inflation, though relatively lower, also saw an increase in November 2024, rising to 0.08%. This small increase in non-food prices was largely attributed to higher transport costs, which went up by 0.41%. This rise in transportation costs could be a result of increased fuel prices and logistical challenges that have affected the broader economy.

The CPI data also provides a detailed look at the month-on-month inflation rates for different regions of the country, showing some variability between urban and rural areas. The Capital City experienced a month-on-month inflation increase of 0.75%, similar to the national trend. This rise was driven by a 1.45% increase in food prices and a 0.12% increase in non-food prices. Within the food category, the Food & non-alcoholic beverages index saw a significant rise of 1.55%, while alcoholic beverages and betel nuts saw no change in price.

The Central region, which includes several key provinces, saw a month-on-month inflation increase of 0.81% in November 2024. Food inflation in the Central region increased by 1.43%, driven largely by a 1.55% rise in the Food & non-alcoholic beverages index. Non-food inflation in this region was 0.23%, with the primary contributor being transport, which saw a modest increase of 0.32%.

The Eastern region reported a month-on-month inflation rate of 0.81% in November 2024, mirroring the increase seen in the Central region. In this case, food inflation rose by 1.35%, with the Food & non-alcoholic beverages index increasing by 1.46%. Non-food inflation in the Eastern region was 0.17%, primarily driven by an increase in transport costs, which went up by 0.62%.

The Western region experienced the highest month-on-month inflation increase, reaching 1.07%. Food inflation in the Western region was particularly high, with an increase of 1.83%. Within the food category, the Food & non-alcoholic beverages index surged by 1.96%, while alcoholic beverages and betel nuts saw a modest increase of 0.20%. Non-food inflation in the Western region rose by 0.27%, largely due to a significant increase in transport costs, which went up by 0.73%.

One of the most significant impacts of rising inflation is the erosion of purchasing power. As measured by the CPI, the purchasing power of the Ngultrum in November 2024 stood at Nu. 55.6, compared to December 2012 levels. This means that Nu. 100 in November 2024 is equivalent to only Nu. 55.6 in December 2012. This represents a 1.84% decline in the purchasing power of the Ngultrum over the past year, reflecting the impact of rising prices on household budgets and the economy as a whole.

The ongoing decrease in purchasing power is a concern for many consumers, especially those with fixed incomes or lower earnings. As inflation increases, the real value of wages and savings diminishes, making it harder for households to maintain their standard of living.

Looking at the broader trend for the entire year, the national average inflation rate for 2023 eased to 4.23%, a decline from the 5.64% recorded in 2022. This easing of inflation was largely driven by a deceleration in non-food price increases, particularly in transport and communication sectors. The non-food inflation rate for 2023 slowed to 4.44%, down significantly from 7.10% in 2022.

However, food inflation saw a slight increase in 2023, rising to 3.97% compared to 3.95% in 2022. The main drivers of this increase were higher costs in the alcoholic beverages and betel nuts category, which surged by 4.62%, a sharp rise of 3.46 percentage points from the previous year. Despite this, food inflation remained relatively stable overall, reflecting a balance between price increases in some categories and price decreases in others.

As we move into 2025, the inflation outlook for country remains uncertain. Continued global supply chain disruptions, fluctuating commodity prices, and potential external economic shocks could contribute to further inflationary pressure. On the other hand, a stabilization in global food prices and improved domestic production could help ease food inflation in the coming months.

The government will need to closely monitor inflation trends and take appropriate measures to support households, especially those most affected by rising prices. This could include targeted fiscal policies, subsidies for essential goods, or measures to stabilize the exchange rate to protect the purchasing power of the Ngultrum.

Country’s inflation trends in November 2024 reveal a mixed picture for the economy. While food inflation has surged, particularly in the categories of food and non-alcoholic beverages, non-food inflation has seen a decline, providing some relief. However, the continued erosion of the purchasing power of the Ngultrum remains a significant concern for consumers. With inflation continuing to rise across regions, the government faces ongoing challenges in managing the economic impact of these price increases and safeguarding the well-being of its citizens.

With the onset of 2025, it is crucial for policymakers to remain vigilant in addressing inflationary pressures and ensuring that the economic recovery remains sustainable in the face of rising costs.