Driven by supply factors Dec. inflation up to 12.1%

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index, increased to 12.1% in December 2021 from 9.9% in November 2021.

Meanwhile, on an annual average basis, the CCPI increased to 6.0% in December 2021 from 5.3% in November 2021.

An in-depth analysis of the key drivers of current inflation suggests that a large component of inflation is driven by supply-side factors. Inflation was driven by monthly increases in prices of items in both the Food and Non-food categories. Subsequently, Food inflation (Y-o-Y) increased to 22.1 per cent in December 2021 from 17.5% in November 2021, while Non-food inflation (Y-o-Y) increased to 7.5% in December 2021 from 6.4% in November 2021.

The monthly change of CCPI was recorded at 2.64% in December 2021 due to price increases observed in items of both Food and Non-food categories which were 1.80% and 0.84%, respectively.

Accordingly, within the Food category, prominent increases were observed in the prices of vegetables, fresh fish, and green chillies. Further, prices of items in the Non-Food category recorded increases mainly due to price increases observed in the Restaurants and Hotels, Transport (Petrol, Diesel, Taxi/three-wheeler charges) and Alcoholic Beverages and Tobacco (Arrack, Cigarettes) sub-categories during the month.

The core inflation (Y-o-Y), which reflects the underlying inflation in the economy, increased to 8.3% in December 2021 from 7.0% in November 2021. Moreover, annual average core inflation increased to 4.4% in December 2021 from 4.0% in November 2021.