Are life expenses getting higher every day? Understand inflation and the **causes of inflation** clearly.

Last month, a market broker told us that Thailand’s Consumer Price Index (CPI) was at 110.3, an increase of 0.3% from the previous year. It sounds small, but in real life? Pork prices rose from 137 baht/kg to 133 baht/kg. Diesel prices surged from 28.29 to 40.24 baht/liter. We can clearly feel our wallets getting lighter. That’s because we are experiencing what is called inflation.

What is inflation? Simply put, it’s rising prices.

Inflation means that the prices of goods and services increase continuously, or more precisely, the value of money is decreasing. With the same amount of money, 50 baht could buy many bowls of rice before, but now it can only buy one. In 30 years, the price of rice might reach 100 baht per bowl. That’s the effect of inflation, which erodes purchasing power.

For investors, inflation is a key signal for making investment decisions. If you assess that the inflation rate will increase or decrease, it will directly impact the stock market.

Causes of inflation come in several types:

( 1. Demand-pull inflation )

After the world recovers from a crisis, everyone wants to buy things, but factories can’t produce fast enough. Sellers raise prices. Thailand is doing well; the economy hasn’t reached stagflation yet, but the long-suppressed demand ###revenge spending( has pushed prices up.

) 2. Rising production costs (Cost-push inflation )

Crude oil, natural gas, steel, copper prices soared after economic war agreements and supply chain disruptions, especially shortages of shipping containers and semiconductor chips. Costs increase, and so do the prices of goods.

3. Government printing more money (Printing Money Inflation )

The money supply in the system has increased massively, leading to severe inflation.

Who benefits? Who loses?

Beneficiaries: Traders, entrepreneurs, shareholders, banks, debtors – they can raise prices or carry debt with devalued money.

Losers: Salaried employees, creditors – wages increase but less than inflation, reducing purchasing power.

Effects of inflation on the economy and our lives

Effects on the public

Cost of living rises. Examples of essential goods:

• Red pork: 137 baht/kg (2564) → 133 baht/kg ###2567(
• Diesel: 28.29 baht/liter )2564( → 40.24 baht/liter )2567(
• Bird’s eye chili: 45 baht/kg )2564( → 50-250 baht/kg )2567(

Purchasing power decreases, forcing cuts in other expenses.

) Effects on entrepreneurs Sales decline if prices are raised too much. High costs squeeze profits. Some reduce investments and staff. For example, PTT in the first half of 2024 earned 1,685,419 million baht with a net profit of 64,419 million baht, up 12.7% due to higher oil prices.

( Effects on the country If the economy enters stagflation )high inflation with low growth###, people buy less, businesses sell less, investment drops, and the economy slows down, hindering long-term development.

How are inflation and deflation different?

Both, if severe and prolonged, can harm the economy.

How to measure the causes of inflation?

Every month, the Ministry of Commerce collects data on 430 items and calculates the CPI ###Consumer Price Index(. The inflation rate is the change in CPI compared to the previous year. For example, in January 2024, CPI = 110.3, up 0.3% YoY. This indicates that inflation has decreased for the fourth consecutive month, the lowest in 35 months, due to falling energy and fresh vegetable prices.

Pros and cons of inflation

) Advantages ✅ Business expansion: raising prices increases profits, hires more workers, people have higher incomes, and money circulates more in the system.

✅ Reduces unemployment: increased demand for production requires more hiring.

( Disadvantages ❌ If inflation rises too quickly )Hyperinflation###, prices become unaffordable, sales decline, businesses collapse, and unemployment rises.

❌ Decreased purchasing power: if money is saved without investment, its value erodes.

❌ If interest rates stay negative for a long time, people turn to speculative assets, creating bubbles in stocks and real estate, increasing financial system imbalance.

When inflation is coming, what should we do?

1. Plan investments carefully

Low-interest savings accounts mean investing in high-yield assets like stocks, mutual funds, or real estate.

( 2. Avoid bad debt Don’t buy unnecessary items. Plan expenses strictly.

) 3. Invest in stable assets Gold, real estate – assets with intrinsic value that do not depreciate over time.

4. Keep track of economic news regularly

Inflation affects everyone’s financial standing. Stay informed about current conditions to prepare.

Which stocks benefit during inflation?

Investors can try trading gold CFDs to speculate on both rising and falling prices without owning the actual asset.

Summary

Inflation is coming. It’s not necessarily bad if managed well. Entrepreneurs, investors, banks, and insurance companies can profit greatly. But for salaried individuals, it’s crucial to make smart investment decisions. Don’t keep money idle; open fixed deposit accounts, invest in stocks, bonds, gold, or funds to grow your wealth faster.

The key is to monitor economic news closely, as every decision by the central bank and government impacts the money we earn and save in the Thai economy every day.