SPENDING POWER IN THE BALANCE

Cost of living indices drop in August despite persistent doubts over inflation

The PepperCube Cost of Living Index (CLI) dropped for the fourth consecutive month, reaching its lowest level since June 2021 – the last time being during the height of the pandemic.

With a slight decrease of 0.6 points from the previous month, the index stood at 82.1 in August, marking its lowest level for the year to date.

Moreover, the Colombo Consumer Price Index (CCPI) fell to 0.5 percent year-on-year in August – down from 1.9 percent in the previous month.

This time around, respondents’ perceptions were largely consistent with the preceding month. Ninety-four percent said they feel the cost of living over the past 12 months has increased either ‘highly’ or ‘moderately,’ marking a one percentage point spike from the prior month.

In contrast, only four percent of the sample group believe that prices have either ‘stayed the same’ or ‘decreased’ in August, which reflects a fall from five percent in July.

Looking ahead to the next 12 months, expectations of a ‘highly escalating’ cost of living eased slightly in August with around half (52%) of surveyed executives anticipating an increase. This figure remained unchanged from the previous month.

Additionally, nearly a fifth (19%) of participants expect a ‘moderate escalation’ in their expenses, representing a two percentage point decrease. Meanwhile, 15 percent anticipate their expenditure will ‘stay the same’ and nine percent foresee a change.

Despite the shift in expectations, 76 percent of respondents remain pessimistic, believing they ‘will not have a chance’ to purchase non-food products in the next 12 months – a one percentage point decrease from July.

And 11 percent expect living expenses to remain unchanged, which is consistent with the month prior. And another 11 percent are optimistic about their ability to afford non-food products.

 – LMD

FOOTNOTE An index based on a monthly survey, the CLI aims to measure and understand perceptions regarding the cost of living as opposed to reported or official inflation.