Recently, the National Bureau of Statistics released the selected food prices watch for Feb-2020. According to the report, the majority of the food items recorded an m/m decline in prices as the impact of land border closure eased during the period. Notably, 28 of the 43 food items surveyed, recorded an m/m decline in prices. Also, the largest m/m price decline was recorded on the average price of Beans, Evaporated tin milk, Agric eggs, and Rice.
Looking ahead, we expect the pressure on food prices to resurface as the domestic outbreak of COVID-19 sparks panic purchase of food items and weaken domestic supply. Also, a declaration of a total lockdown across the country might further exacerbate pressures on food prices. Additionally, we note that the continued closure of all land borders and resumption of the domestic planting season in March-2020 would constrain
the overall supply levels.
Factoring all the above, we expect the food inflation sub-index for the month of March-2020 to cross into the 15.0% region (Feb-2020: 14.9%). As such, we expect the headline inflation to increase from the current 12.20% y/y to 12.35% y/y in March 2020.
United Capital Research