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| 20 November 2004 | Saturday | 07 Shawwal 1425 |
Food, house rent push up inflation
KARACHI, Nov 19: The average prices of food and beverages increased by 12.26 per cent and the average house rent went up by 10.76 per cent in October 2004 over October 2003.
These two groups of the 374-item consumer price index, which account for 63.77 per cent of the index, pushed up year-on-year consumer inflation to 8.70 per cent in October 2004 from 3.51 per cent in October 2003.
This means the average increase in the prices of 374-item CPI was 8.70 per cent in October 2004 over October 2003 whereas the average increase in the prices of CPI was only 3.51 per cent in October 2003 over October 2002.
Data released by the Federal Bureau of Statistics show that whereas the increase in the prices of food and beverages and house rent were main factors behind this sharp increase in inflation, the prices of all other groups of items also showed a rising trend.
Following are the average price increase in different groups of the CPI in October 2004 over October 2003. General (8.7pc); household, furniture & equipment etc. (6.23pc); transport & communication (5.19pc); cleaning, laundry & personal appearance (4.66pc); education (2.74pc); apparel, textiles & footwear (2.47pc); fuel and lighting (2.16pc); medicare (1pc) and recreation & entertainment (0.13pc).
FBS data show that year-on-year CPI inflation in July-October 2004 shot up to 9.06 per cent from 2.22 per cent in October 2003. This means that the average increase in the prices of 374-item CPI was 9.06 per cent in July-October 2004 over July-October 2003 whereas the average increase in the prices of CPI was only 2.22 per cent in July-October 2003 over July-October 2002.
A huge 9.06 per cent inflation in the first four months of this fiscal year clearly indicates that the year-on-year inflation for the full fiscal year would end up much higher than the targeted 5 per cent. The government has so far not revised upward the initial estimate of inflation for this fiscal year but senior government officials have publicly admitted it would surpass that level.
The State Bank also said in its annual report for the last fiscal year that inflation during this year would exceed the targeted level "if the shortfall in the supply of commodities persists."
This implies that the central bank has taken, and is ready to take, monetary measures required for taming inflation through demand side and it is time for the government to take administrative measures to check it through supply side.
That the government efforts to tame inflation by increasing the supply of staple food items are yet to produce the desired results is evident from the fact that the price of wheat flour has not fallen as yet despite heavy imports of wheat.
FBS data show that the average price of ordinary wheat flour increased to Rs14.17 per kg in October form Rs13.85 in September. The data also show that the average price of a 10-kg bag of wheat flour rose to Rs127.85 in October from Rs125.08 in September. Similarly, the average price of a 10-kg bag of wheat also went up to Rs116.99 from Rs114.14.
When the government had started wheat imports earlier this fiscal year it had claimed that the imports would help stabilize the prices of wheat and wheat flour across the country. But the fact that the prices of wheat and wheat flour have not stabilized as yet suggests that there is something wrong somewhere.
That the prices of wheat and wheat flour have not shown a declining trend in October sounds all the more disturbing because the first half of Ramazan fell in the second half of October. Flour millers claim that they slashed prices of wheat flour during Ramazan.
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