VIEW: JP Morgan Says Underlying Inflation Trend Rising

June headline CPI inflation printed lower than expected at 0.6% y/y down from 1.5%, while core was steady at 0.4% y/y. JP Morgan estimates a core-core measure and observes that it is “on a gradual recovery trend” signaling that domestic demand is steady. It notes that swings in headline this year have been driven by oil prices, fresh food and administrative prices. As a result, it expects the Bank of Thailand to be on hold and focus on “debt deleveraging in the medium term.”

• JP Morgan revised down its 2024 CPI forecast to 0.4% from 0.8% following the June data, “with the return to the 1%-3% target range delayed to 4Q24.”
• JP Morgan calculates that “headline CPI fell 0.4%m/m, sa, the largest monthly deflation since September 2023, while core CPI stayed flat. … The monthly deflation was driven primarily by raw food (-0.21%pt. contribution to headline monthly decrease of 0.38%m/m, sa) and core (-0.16%pt.) components. The drop in raw food prices, was in turn, attributed to fruit & vegetables (-0.25%pt.), retracing most of the gains in April,” due to stronger output.
• “Despite the sharp rise in global crude oil prices last month (10%m/m), energy CPI stayed roughly flat as the Oil Fund increased subsidies to maintain the diesel price cap (Figure 3). This is consistent with the government’s recent decision to re-impose administration price controls on diesel, cooking gas, and electricity through July-August.”