Inflation rate drops to 10.2pc in March

Updated 02 Apr 2020

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For the first time since July last year inflation has seen downward trend for second month in a row. — AFP/File
For the first time since July last year inflation has seen downward trend for second month in a row. — AFP/File

ISLAMABAD: The Pakistan Bureau of Statistics (PBS) on Wednesday said the inflation rate fell to 10.2 per cent in March from 12.4pc in the previous month owing to decline in prices of essential food items for a second consecutive month.

This is for the first time since July last year that inflation measured by the Consumer Price Index (CPI) has seen a downward trend for a second month in a row due to a combination of factors including improvement in supply of eatables and reduction in prices of energy items.

The data collected from markets to determine monthly inflation rate shows that many markets remain operational during the first half of March though it will be a big challenge to do a similar exercise in April amid lockdown. In most of the markets across Pakistan, only those shops selling groceries, fruits and vegetables have been allowed to keep the shutters open for a limited time.

Some visible drop in prices of vegetables, fruits and pulses has been noted besides decline in price of LPG cylinders used for cooking purposes in rural areas. The 10.2pc inflation is the lowest rate in past seven months.

An official of the statistics division told Dawn that the PBS collected data from markets up to 15 of each month regarding groceries and food items. The prices of electricity, gas, LPG, petroleum products are administrated prices which are easily available.

It is first time since July last year that inflation has seen downward trend for second month in a row

“We will have no problem in calculating inflation rate in April,” the official claimed, adding that data would be collected between April 11 and 15.

The heavy weightages items in inflation such as groceries and eatables are already available in the market and most of the non-food items are constant in prices. “Our representatives will collect data from stores in April,” the official explained.

On supply side, chief secretaries of the provincial governments have already issued the instruction to deputy commissioners to ensure supply, availability of essential items and keep check on their prices in their respective districts.

However, food inflation in urban areas rose by 13pc in March on a yearly basis and 0.6pc on a monthly basis, whereas it increased by 15.5pc and declined by 0.3pc, respectively, in rural areas.

It clearly shows that food inflation is still very high in rural areas where most of the population lives, which is an unprecedented phenomenon.

In urban areas, the food items which saw an increase in their prices include: Onions (35.07pc) potatoes (10.93pc), fresh fruits (8.53pc), chicken (3.25pc), milk powder (1.86pc), mustard oil (1.7pc), eggs (1.62pc), condiments and spices (1.58pc), butter (1.24pc), beans (1.18pc), gur (1.12pc), milk fresh (0.96pc) and meat (0.84pc).

The items whose prices declined in urban areas include: tomatoes (23.29pc), fish (9.25pc), wheat (8.43pc), fresh vegetables (7.78pc), pulse gram (5.13pc), pulse masoor (3.39pc), wheat flour (3.17pc), pulse mash (2.33pc) and sugar (0.54pc).

In rural areas, the food items whose prices increased include: onions (40.95pc), fresh fruits (8.04pc), potatoes (6.82pc), beans (3.77pc) and vegetable ghee (1.05pc). The items whose prices decline in rural areas include: tomatoes (36.43pc), wheat (7.39pc), fresh vegetables (5.64pc), pulse gram (5.07pc), chicken (4.85pc), pulse masoor (3.45pc), eggs (3.17pc), gram whole (2.58pc), wheat flour (2.52pc), pulse mash (2.05pc) and gur (1.02pc).

The prices of tomatoes dropped significantly following increase supply from Punjab while prices of onions and potatoes are still on higher side. The government has recently banned export of onions to contain its domestic price.

Similarly, non-food inflation in urban centres was recorded at 7.3pc year-on-year, while it dropped by 0.1pc on a monthly basis. Non-food inflation in rural areas was 8.5pc year-on-year and enhanced by 0.1pc on a monthly basis.

The slight decline in non-food inflation is mainly driven by a drop in oil prices over the past few months. Moreover, no increase in electricity prices was made on account of monthly fuel price adjustment in March 2020, which also impacted the index positively. The PBS reported 13.92pc reduction in electricity charges on a year-on-year basis in March.

The average inflation between July 2019 and March 2020 stood at 11.53pc as against 6.31pc over the corresponding months last year.

While the International Monetary Fund has estimated that the country’s inflation may rise as high as 13pc, the government has claimed that it will remain within the range of 11-13pc for the current fiscal year. The Asian Development Bank, too, in its outlook projected annual inflation in Pakistan at 12pc.

The urban CPI covers 35 cities and 356 consumer items, while the rural CPI tracks 27 rural centres and 244 items. The former enhanced by 9.3pc year-on-year in March, whereas the latter jumped by 11.7pc.

The core inflation rate in urban areas was 7.4pc in March as against 8pc the previous month, according to the new methodology. The core inflation rate in rural areas was 9.4pc in March, while it was at the same rate in the previous month.

The central bank determines the key policy rate — currently at 11pc — on the basis of the core inflation rate. The SBP has reduced the rate by a cumulative 2.25 pc points in one week duration to combat uncertainty amid growing coronavirus outbreak.

Average inflation measured by the sensitive price index crawled up to 14.85pc during the July-March period from 3.58pc during the same period last year, while the wholesale price index dipped to 12.99pc from 16.03pc.

Published in Dawn, April 2nd, 2020