Prepared food prices remain high despite cheaper fuel

Lower domestic fuel prices are expected to lift consumer confidence, but are unlikely to immediately reduce prepared food prices, according to the Thai Restaurant Association.

The drop in fuel prices is a positive sign and is likely to boost consumer purchasing power, said Thaniwan Kulmongkol, president of the Thai Restaurant Association. After the Middle East war began, many eateries raised their menu prices, citing higher costs.

Diesel, a key component in business logistics, has dropped from more than 50 baht per litre in early April to less than 35 baht.

"Food prices tend to rise quickly, but reductions take more time," she noted.

Many restaurateurs are still using inventory purchased at higher prices, including raw materials and packaging, said Mrs Thaniwan.

Operators also continue to face high costs for rent, electricity and labour, which have not fallen in line with energy prices. Some ingredient prices such as vegetable oil also remain high.

"If the current reductions prove short-lived, operators may be reluctant to lower menu prices," according to her statement.

In the broader market, Mrs Thaniwan said operators will monitor the customer response and competitor pricing. If competitors do not lower prices, they might not rush to decrease their own prices.

EASED COST OF LIVING

Somchai Pornrattanacharoen, honorary adviser to the Thai Wholesale and Retail Trade Association, said Thailand's economy has remained sluggish for a long time, with consumer purchasing power still weak.

He said lower energy prices will help ease concerns over the cost of living.

While the Middle East war caused a spike in energy prices, most Thai consumer goods manufacturers were hesitant to raise their product prices. Instead, some opted to cut promotions typically offered to wholesalers.

Thailand is a major manufacturer of consumer goods in the region, but border issues with Cambodia and Myanmar have hindered exports, resulting in increased domestic supply, said Mr Somchai. An influx of foreign goods, likely from China, is worsening the glut and keeping consumer goods prices from rising, he said.

CHEAPER STEEL COSTS

The latest retail oil price cut helps to reduce costs in the local steel industry, which is struggling to compete with an influx of cheap steel imports from China, said the EAF Long Product Steel Producers Association.

Chaichalerm Bunyanuwat, president of the association, said steelmakers will pay less for steel transport, reducing pressure in an intensifying market.

"Decreasing oil prices will be reflected in lower inflation, which should stimulate consumer purchasing power," he said.

However, the outlook in the Middle East remains volatile and a permanent ceasefire in the region is crucial for the growth of the energy-intensive steel industry, said Mr Chaichalerm.

Many steel factories in Thailand rely on electricity for manufacturing.

Gas accounts for nearly 60% of fuels used for power generation in Thailand. Geopolitical conflicts drive up prices of liquefied natural gas imported to the country.

"The steel industry is using more renewable energy, notably solar power, but it accounts for a small proportion and remains expensive," he said.