Inflation hits double digits after nearly six years

Updated August 02, 2019

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Upward adjustments in prices of petroleum products, electricity and gas fuel total inflation. — AFP/File
Upward adjustments in prices of petroleum products, electricity and gas fuel total inflation. — AFP/File

ISLAMABAD: Inflation has entered double digits in the first month of the new fiscal year, the biggest increase in five years and nine months.

Inflation, measured by the Consumer Price Index (CPI), rose to 10.34 per cent in July this year from 8.9pc the preceding month, the Pakistan Bureau of Statistics said on Thursday. During the same month last year, inflation stood at 5.84pc.

The last time inflation entered the double digits was in November 2013 and recorded at 10.9pc.

The upward adjustments in prices of petroleum products over the past few months, followed by an increase in electricity and gas tariffs fuelled the total inflation. The government also introduced certain tax measures, the cumulative impact of which dragged the overall inflation to double digits. The rupee depreciation also led to an increase in prices of imported consumer and non-consumer items, especially raw material used in manufacturing of industrial products, over the past few months.

The government has projected an inflation target of 11pc to 13pc for the fiscal year 2019-20, compared to 7.3pc recorded in 2018-19. Price levels, perked up in the first month of the current fiscal year, appear to have been driven by a spike in non-food inflation in July.

Upward adjustments in prices of petroleum products, electricity and gas fuel total inflation

The CPI tracks the prices of around 480 commodities every month in urban centres across the country.

Food inflation was up 9.2pc on an annual basis, but surged 1.5pc on a monthly basis. Prices of non-perishable food items rose by 7.85pc and those of perishable products by 8.06pc in July.

Food items whose prices increased the most in July were: potatoes 16.84pc, pulse moong 5.41pc, eggs 5.06pc, gur 4.80pc, pulse mash 4.50pc, wheat flour 3.58pc, fresh vegetables 3.56pc, pulse masoor 2.83pc, vegetable ghee 2.49pc, bakery and confectionary 2.45pc, rice 1.77pc, milk fresh 1.41pc, pulse gram 1.31pc, tomatoes 1.17pc, sugar 1.09pc and meat 0.93pc. In the same category, however, prices of chicken declined by 8.26pc, fresh fruit 7.95pc, onions 1.73pc and betel leaves & nuts 0.65pc.

On the other hand, non-food inflation increased 11.1pc on a yearly basis and 2.8pc on a monthly basis. The increase is mainly driven by higher oil prices over the past few months and the combined impact of the depreciation of the exchange rate. The government passed on this increase to domestic consumers.

Non-food prices also remained under pressure on account of education index, which increased to 6.9pc. Clothing and footwear went up by 7.4pc, housing, water, electricity, gas and other fuels by 12.74pc, furnishing and household equipment by 10.17pc, health by 8.97pc, transport by 14.67 pc and recreation and culture by 7.67pc.

Core inflation, measured by excluding volatile food and energy prices, was recorded at 7.8pc on a yearly basis and 1.7pc on a monthly basis.

On July 16, the State Bank of Pakistan has raised its main policy rate by 100 basis points to 13.25 per cent, citing increased inflationary pressures and a likely near-term rise in prices from higher utility costs.

The gradual build-up of domestic demand is evident in the rising core inflation. Of the 89 commodity groups of CPI, it covers the price movement of 43 items. Due to a continuous increase in education and healthcare costs, core inflation remained higher on average, compared to the same period last year.

Average inflation measured by the Sensitive Price Index crawled up 12.16pc in July as against 3.58pc the previous year, while the Wholesale Price Index was up 13.46pc, compared to 10.50pc in 2018-19.

Published in Dawn, August 2nd, 2019