Inflation jumps in August as index is rebased

Updated September 05, 2019

Email

Chicken, onion, tomato and vegetables recorded a double-digit price hike in percentage terms in urban as well as rural areas.
Chicken, onion, tomato and vegetables recorded a double-digit price hike in percentage terms in urban as well as rural areas.

KARACHI: The Consumer Price Index (CPI), which is the main indicator used by the State Bank when deciding interest rates, came in at 10.5 per cent for the month of August, after the Pakistan Bureau of Statistics (PBS) revised the method by which the crucial indicator is calculated.

“CPI inflation general, increased by 10.5pc on year-on-year basis in August 2019 as compared to an increase of 8.4pc in the previous month and 6.2pc in August 2018,” the PBS said in its inflation review, citing figures based on new base year.

“PBS has changed the base year for price statistics from 2007-08 to 2015-16,” the announcement accompanying the data release said. The change in base year means the price level obtaining in the economy in FY16 will now be the base against which all existing prices will be calculated for purposes of calculating the CPI.

Going by the old base year of FY08, that was being used for determining the CPI until now, the key inflation index comes in at 11.63pc for the month of August, showing a 1.64pc increase over the month of July. But now as per the new base year, the July CPI will be 8.4pc.

Aside from the rebasing, the PBS has also changed the weights assigned to various consumption items in the CPI basket, and introduced a new panel of prices to be obtained from urban and rural areas. “The Urban CPI covers 35 cities and 356 consumer items. The Rural CPI covers 27 rural centres and 244 consumer items,” the accompanying statement said.

From here on, the CPI will be calculated as a weighted average of urban and rural prices.

The weight assigned to housing, water, electricity, gas and other fuels has been decreased significantly, as well as transport.

Meanwhile, the weight assigned to restaraunts and hotels has been significantly increased, as well as a category labelled as “misc goods and services”. The weights are assigned based on data from the household consumption survey.

The data shows that the price hike from July to August has been led by chicken, onion, tomato and vegetables, all of which saw a double-digit price hike in percentage terms in urban as well as rural areas.

The only item that saw a double-digit percentage decline in this time period was fresh fruits.

But compared to August last year, the price increases are much sharper. Gas prices show a 114pc increase in this time in urban areas, followed by chicken at 75pc and onion at 61pc. Rural areas saw the biggest price surge in food items like onions, chicken and pulses during this time as well.

Published in Dawn, September 5th, 2019