Sri Lanka’s inflation trends down in December 

Sri Lanka’s prices of food and non-food items have come down in December last year, Central Bank announced on Monday releasing last month’s head line inflation report.

A street opinion poll however, revealed that everybody is cutting back on their spending with the the lower middle class and the poor struggling to make ends meet.

Analysts say that food prices often change at a greater rate than overall inflation.

Food prices tend to be more volatile because they are determined by factors, such as the weather. Also, with inelastic supply and demand, this makes prices more volatile, they added.   

Headline inflation as measured by the year-on-year change in the National Consumer Price Index (NCPI, 2013=100)1 decreased to 0.4 percent in December 2018 from 1.0 percent in November 2018.

The decrease observed in year-on-year inflation in December 2018 is driven by the decrease of prices of items in both Food and Non-food categories, Central Bank said.  
Year-on-year food inflation decreased to -4.5 percent in December 2018 from -3.9 per cent in November 2018 while year-on-year Non-food inflation also decreased from 5.2 percent in November 2018 to 4.7 percent in December 2018.

The change in the NCPI measured on an annual average basis decreased to 2.1 per cent in December 2018 from 2.7 per cent in November 2018.

The month on month change of the NCPI was -0.5 per cent in December 2018. This was mainly due to decrease in the prices of the items in the Non-Food category where Transport sub-category (Petrol, Diesel and Bus fare) recorded the highest decrease.

Moreover, prices of items in the Communication; and Alcoholic Beverages and Tobacco sub-categories also reported decreases during the month.

At the same time, prices of items in the food category decreased where vegetables, limes, big onions, bananas and coconuts recorded prominent decreases.

The core inflation, which reflects the underlying inflation in the economy, remained at 3.1 percent in December 2018 on year-on-year basis. Meanwhile, annual average core inflation also remained unchanged at 2.4 percent in December 2018.