(Updates with government’s comments from sixth paragraph.)
Nov. 1 (Bloomberg) -- Thailand’s inflation rate held above 4 percent for the seventh straight month in October as the worst floods in almost 70 years destroyed crops and stoked food costs.
An index of consumer prices climbed 4.19 percent from a year earlier, the Ministry of Commerce said in Nonthaburi province outside Bangkok today, compared with a 4.03 percent pace in September. The median of 13 estimates in a Bloomberg News survey was for a 4.5 percent gain.
Floodwaters have swept across most of the country since late July, killing at least 384 people, swamping factories and destroying farms. The Bank of Thailand slashed its 2011 economic growth estimate following the disaster, adding pressure on policy makers to bolster expansion.
“With the flood crisis as a backdrop, the central bank is unlikely to give much weight to inflation figures at its policy meeting due Nov. 30,” Pornthep Jubandhu, an economist at Siam Commercial Bank Pcl in Bangkok, said before the release. If the floods further damage the economy, the central bank could cut interest rates, he said.
Thailand’s benchmark SET Index of stocks has slumped about 15 percent in the past three months, while the baht has declined 3.6 percent against the dollar, according to data compiled by Bloomberg. The stock index was little changed as of 12:31 p.m. local time. The currency slipped 0.3 percent to 30.83 per dollar.
Food, Vegetable Prices
“The floods have damaged farmland, leading to rising food prices,” Yanyong Phuangrach, the permanent secretary for commerce, said at a briefing today. The waters have also increased transport costs and disrupted supplies of items such as cans and plastic bottles after swamping factories, he said.
The food and beverage index rose 9.89 percent in October from a year earlier, led by fruit and vegetable prices, today’s report showed. The commerce ministry forecast the flooding will boost consumer-price inflation by 0.38 percentage point in the fourth quarter.
Thailand’s inflation has accelerated because of supply shocks caused by the floods, central bank Governor Prasarn Trairatvorakul told reporters in Bangkok today. Monetary policy won’t take into account temporary factors affecting consumer prices, he said.
“When the flooding eases, inflation should be back to normal,” Prasarn said.
Core inflation, which excludes fresh food and fuel prices, slowed to 2.89 percent last month. The central bank uses the core measure to guide monetary policy and aims to keep it at less than 3 percent. The median of 10 estimates in another Bloomberg News survey was for a core reading of 3 percent.
The central bank, which left its key rate unchanged last month for the first time in 2011, at 3.5 percent, will switch to targeting headline inflation of 3 percent next year, with a so- called tolerance band of 1.5 percentage points.
The authorities are diverting water to try and protect Bangkok, and Prime Minister Yingluck Shinawatra said yesterday most of the capital will be spared.
Flood-related losses are likely to be “much higher” than the government’s initial estimate of 100 billion baht ($3.2 billion), Rahul Bajoria, a Singapore-based regional economist at Barclays Plc, said in a note today. They may reach 200 billion baht to 300 billion baht, equivalent to 2 percent to 3 percent of gross domestic product, he said.
“The risks are rising of a temporary rate cut ahead of the next policy meeting,” Bajoria said.
Companies including Apple Inc. and Toyota Motor Corp. are facing supply disruptions because of the flooding. Thailand makes about a quarter of the world’s hard-disk drives and serves as a production hub for Japanese carmakers and electronics firms.
The Bank of Thailand on Oct. 28 cut its economic growth forecast for 2011 to 2.6 percent from 4.1 percent. It lowered its inflation estimate for the year to 3.8 percent from 3.9 percent. Consumer prices may climb 3.5 percent in 2012, compared with an earlier projection of 3.2 percent, it said.
The central bank had increased rates nine times since the start of July 2010 to damp inflation before pausing last month.
--With assistance from Michael Munoz in Hong Kong. Editors: Sunil Jagtiani, Tony Jordan
To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net
To contact the editors responsible for this story: Tony Jordan at firstname.lastname@example.org; Stephanie Phang at email@example.com