ISLAMABAD: Inflation in Pakistan surged to seven per cent in October, up from 3.8pc in the same month last year — marking the biggest increase in three years and 10 months.
Compared to September this year, the consumer price index (CPI) in October increased by 2.6pc.
The government has projected a 6pc annual inflation target for 2018-19, which was already crossed in October.
The average rate in FY18 was 3.92pc versus 4.16pc in the year before.
Between July-October 2018, the inflation edged up to 5.95pc this year from 3.5pc posted over the corresponding period of last year.
The State Bank has been warning of overheating demand pressures building up in the economy since at least January this year. It has attributed these pressures to the recovery in global commodity prices, including oil, growing domestic demand and depreciation of the rupee pushing up the overall inflation steadily.
In its latest annual report released weeks ago, the SBP also pointed out that the money supply has been increasing and crossed the previous high water mark set in 2008 by touching 46.5pc of GDP in FY2018. In response, the central bank raised interest rates to try and restrain the growth of the money supply, but said this effectiveness of these hikes “hinges upon coordinated attempts to maintain fiscal discipline”. On the contrary, though, the fiscal deficit has shown no signs of contracting.
The CPI tracks the prices of around 480 commodities every month in urban centres across the country.
Food inflation was up 2.7pc on an annual basis but edged up 1.9pc month-wise. Prices of non-perishable food items were higher by 5.22pc during the month under review while those of perishable products fell by 12.74pc.
Food items whose prices increased the most in October were chicken, up 35.25pc, eggs 14.41pc, tomatoes 3.85pc, fresh vegetables 3.7pc, spices 1.89pc, betel leaves & nuts 1.77pc, and wheat 1.56pc.
In the same category, however, onion dipped 4.43pc month-on-month, fish 1.38pc, pulse mash 1.18pc, and gram whole 0.20pc.
On the other hand, non-food inflation rose 10pc, 3pc on yearly and monthly basis, respectively.
The increase in non-food inflation is mainly driven by uptick in prices of gas, crawling up 104.9pc, newspapers 15.9pc, communication and apparatus 7.54pc, doctor fee 3.39pc, drugs and medicines 3.32pc, motor fuel 3.23pc, water supply 2.7pc, personal equipment 2.62pc, medical tests 2.37pc, transport services 2.04pc, motor vehicle accessories 1.88pc and construction input items 1.83pc.
The non-food prices also remained under pressure on account of education index, which rose to 11.54pc, clothing and footwear 6.73pc, housing, water, electricity, gas and other fuel 9.87pc, furnishing and household equipment 6.99pc, health 9.21pc, transport 18.6pc and recreation and culture 8.57pc.
Core inflation, measured by excluding volatile food and energy prices, was recorded at 8.2pc year-on-year and 1.1pc on a monthly basis. Core inflation has been steadily rising for the past couple of months.
The gradual build-up of domestic demand is evident in the upswing in core inflation. Of the 89 commodity groups of CPI, it covers the price movement of 43 items. Due to the continuous increase in education and healthcare costs, core inflation remained higher on average compared to the same period last year.
Average inflation, measured through the sensitive price index, crawled up 2.3pc in July-October as against negative 0.84pc in the previous year, while wholesale price index was up 10.97pc from 1.38pc in 2017-18.
Published in Dawn, November 3rd, 2018