Higher costs spur price hikes

CONSUMER ECONOMY

Higher costs spur price hikes

Oil, raw-material expenses surge

Published on January 9, 2008

Low-income consumers will be hit hardest by rising retail consumer-good prices, as their minimum-wage raise cannot cover the costs, say industry sources.

With oil prices surging to US$100 (Bt3,300) per barrel, local producers are gearing up to raise consumer prices. Cooking oil, canned sardines and 5-kilogram bags of rice - all essential foodstuffs that are easily accessible by low-income earners - will likely soon receive Commerce Ministry approval for a price rise, said the sources.

The ministry's Internal Trade Department will allow palm and soybean oil to increase again, by Bt5.50 per 1-litre bottle this year. Vegetable-oil prices have increased twice since late last year. In comparison, the minimum wage was recently adjusted by Bt3 a day.

Finance Ministry spokesman Somchai Sujjapongse said the ministry would not adjust its economic forecast anytime soon. The ministry prefers to wait and watch oil-price movements over the next three months. If oil prices remain at the current level, the ministry will adjust its economic forecast.

Nonetheless, Somchai said the Finance Ministry would not adjust value-added tax from the current 7 per cent, but rather would restructure the entire tax system to make it more effective.

All eyes are now turning to the Organisation of Petroleum Exporting Countries meeting at in Vienna on February 1, to see whether the cartel will make any decision to ease the skyrocketing rise of oil prices.

An oil-price increase could lead to a surge in all local prices.

Internal Trade Department director-general Yangyong Phuangrach yesterday said palm and soybean oil prices would be increased in two stages, with the first rise happening this month at Bt3 per bottle and a second rise later this year. A price rise of Bt5.50 per bottle would increase the price of palm oil to Bt49 a bottle and soybean oil to Bt51 a bottle.

He said the government must allow the price hikes following huge rises in raw-material costs combined with a fear of a shortage of goods. However, the government will not allow price increases more than once, in order to prepare a period of adjustment for consumers.

Canned fish will also be approved for a price hike of Bt1 to Bt2 per can. Currently, manufacturers have lowered their production capacity after suffering losses from the rising costs of production.

Thai Rice Packers' Association president Somroek Tangpiroonthum said rice packers would also increase retail prices in the second quarter, due to high prices in the domestic market and rising production and logistics costs.

However, prices should not rise above the ceiling price, which is limited to between Bt150 and 160 for a 5-kilogram bag of jasmine rice and between Bt65 and Bt110 for the same-size bag of white rice.

Thip, 45, a housekeeper, said she would suffer from the rising costs of consumer goods, since her daily expenses were limited.

"The minimum wage has been increased from Bt191 a day to Bt194, but that cannot cover the rising cost of living," she said, adding that she had no savings, due to increasing daily expenses.

One security guard said low-income consumers were tightening their belts to survive in a tougher economy.

"The rising costs of consumer goods will hit us hardest, because we must shoulder higher living costs that our salaries cannot cover," he said.

He called for the government to control consumer prices as much as possible, in order to shield consumers.

Petchanet Pratruangkrai

The Nation