Oct inflation down on improved supply

• Annual inflation surprises with higher-than-expected fall
• Improved food supply cool inflation-cenbank
• Cenbank says Nov inflation to rise

By Shihar Aneez

 (Reuters) - Sri Lanka’s annual inflation slowed far faster than forecast to a 14-month low in October from a year earlier, government data showed on Monday, due to a better local food supply and easing international commodity prices.

Annual inflation eased to well below the market forecast to 5.1 per cent from 6.4 per cent in September, based on a new consumer price index.

“Significant improvement in domestic food prices is the main reason, especially fish,” Central Bank Chief Economist K.D. Ranasinghe told Reuters.

“At the same time international prices also remained subdued. Still we hope we can end the year between 4-6 per cent and we expect fuel price hikes to put pressure on November inflation.”

The government increased petrol and diesel prices by 9.6 per cent and 10.5 per cent respectively with effect from Sunday.

Annual average inflation, measured on a 12-month moving average, slowed for the first time since December to 7.1 per cent this month, from September’s 7.2 per cent, its highest in the new index.

A Reuters poll of 11 analysts had forecast annual inflation to cool to 6 percent and annual average inflation to remain steady at 7.2 per cent.

The Department of Census and Statistics in June introduced a new index based on a 2006/2007 survey, replacing an earlier one that had 2002 as a base year as opposition parties blamed the government of manipulating basket of goods considered to compile inflation data.