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Monday, January 03, 2011 - 07.03 GMT

2010 inflation lowest since 1999
Rupee appreciated by 1.7% against US$


The annual average rate of inflation, as measured by the Colombo Consumers’ Price Index (CCPI) (2002=100), was 5.9 per cent in 2010 which is the second lowest annual average (end year) inflation rate observed since 1999.

The year-on-year inflation stood at 6.9 per cent in December 2010, data from the Department of Census and Statistics showed.

The impact of high import prices on consumer prices was somewhat mitigated by the appreciation in the exchange rate. The Sri Lankan rupee appreciated by about 1.7 per cent against the US dollar on average in 2010, the Central Bank said.

Favourable domestic supply conditions due to improvements in the agriculture sector as well as increase in supply of food commodities, mainly from the North and East helped contain price pressure to a certain extent, the Central Bank said adding, seasonal increases of prices of some commodities were experienced during some months of the year.

In the international market, commodity prices increased with the recovery in the global economy. However, the impact of these price changes on the domestic inflation was arrested by import duty revisions. Further, the unchanged prices for petrol and diesel during the year helped contain inflation. Prudent monetary policy also supported preventing inflation from rising, the Central Bank said.

The contribution to the annual average change of 5.9 per cent in the index arose mainly from sub category of Food and non-alcoholic beverages which increased by 6.8 per cent. Paddy production in 2010 improved when compared to that of the previous year and the average price of rice recorded a drop in 2010 compared to 2009. The prices of vegetables were generally higher compared to the previous year, though seasonal decreases were reported during the course of the year. The average prices of fish and sea food increased by around 10.2 per cent in spite of the improved fish production during 2010. Adverse weather conditions contributed to price increases during the middle of the year. However, fish prices decreased towards end of 2010.

There was an increase of around 3.4 per cent in the housing, water, electricity, gas and other fuel sub index, recorded in 2010 compared to the last year. This was mainly due to the net impact of revision of LP gas prices affected during the period. Although the import prices of crude oil increased by over 25 per cent during the year compared to 2009, domestic prices were not adjusted.

Unlike in 2009, prices in the import category in the CCPI basket contributed to inflationary pressure in 2010. Import duties were adjusted on imported items from time to time to reduce the impact of high import prices on domestic inflation. The contribution of imported items to annual average inflation, increased from negative 10.0 per cent in 2009 to 14.8 per cent in 2010, while the contribution of domestic items decreased from 110.0 per cent in 2009 to 85.2 per cent in 2010. Accordingly, the average domestic prices of wheat flour and milk powder decreased while the price of sugar increased, compared to 2009.

The annual average core inflation, which is derived by excluding food and energy items from the CCPI basket, declined to 6.3 per cent in 2010 from 9.2 per cent in 2009.





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Last modified: January 03, 2011.

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