ISLAMABAD: Inflation further slowed to 2.1 per cent in April 2015 from 2.5pc in the preceding month thanks to lower fuel and foods prices. It was the lowest level since 2003.

The inflation measured through the Consumer Price Index (CPI) was 4.81pc on average during the first 10 months (July-April) of this fiscal year, the Pakistan Bureau of Statistics data showed on Monday.

The deceleration in inflation was witnessed despite a double-digit increase (10.67pc) in price of perishable products followed by 8.66pc surge in education price and 1.55pc increase in price of recreation and culture in April 2015 over the previous month. Similarly, prices of housing, water, electricity, gas and fuels increased by 0.69pc in the month.

The increase in oil prices after six months may arrest further decline in transport prices this month as statistics showed an increase of 0.89pc in transport price in April 2015 over the previous month.

Core inflation — which is measured by excluding volatile food and energy prices — slowed for the seventh consecutive month by 0.6pc to 5.4pc in April compared to 5.9pc in the previous month. Falling inflation has also encouraged the State Bank of Pakistan (SBP) to cut its policy rate to a decade low.

The slowing down of inflation apparently indicates that Pakistan is heading towards deflation.

The symptoms of deflation are already visible from some economic indicators, he said, adding profitability of businesses was falling leading to low borrowing from the banks. As a result the investment also fell significantly during the period under review.

Former Economic Adviser Dr Ashfaq H. Khan told Dawn that the country was already in deflation since November 2014 on the basis of Wholesale Price Index (WPI). “This is a dangerous sign for the economy.”

He said the growth in Large-Scale Manufacturing (LSM) had slowed to less than one per cent and exports were falling rapidly. “These are all signs of deflationary economy and the government needs to change its fiscal and policy level stance,” Dr Ashfaq asserted.

Average inflation measured through Sensitive Price Index (SPI) was 1.86pc in July-April 2014-15, while WPI inflation was 0.03pc reflecting less demand for domestic commodities apparently because of low purchasing power.

As a result of low inflation, the government has drastically cut the export refinance rate and long-term financing facility to make exports competitive.

In April, annual food inflation rose to 1.53pc over the previous month, while that of non-perishable food items and perishable items increased to 0.14pc and 10.67pc, respectively.

The food items whose price increased included onions (51.16pc), fresh vegetables (14.33pc), chicken (11.07pc), fresh fruits (9.93pc), sugar (5.85pc), tea (3.37pc), pulse mash (2.19pc) and gur (1.67pc).

On the other hand, year-on-year non-food inflation was 1.3pc. The non-food items whose prices rose included education (8.66pc), sewing needle & dry cell (8.01pc), text books (3.28pc), readymade garments (3pc), motor fuel (2.74pc), tailoring (1.52pc), kerosene (1.47pc), doctor clinic fee (1.46pc), personal equipment (1.33pc), hosiery (1.26pc), medical equipment (1.21pc) and cotton cloth (1.02pc).

Published in Dawn, May 5th, 2015

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