Consumer goods' prices continued their upward trajectory in January and reached a two-year high as inflation soared to 12.96 per cent, data released by the Pakistan Bureau of Statistics (PBS) on Tuesday.

According to the PBS data, the year-on-year inflation during the last month — measured by the Consumer Price Index (CPI) — was the highest since January 2020 while the month-on-month inflation increased to 0.39pc compared to December.

In January 2020, inflation had risen to 14.6pc.

The average inflation rate between July 2021 to January 2022 stood at 10.26pc.

Fahad Rauf, the head of research at Ismail Iqbal Securities Ltd, had earlier told Dawn that an increase in petroleum prices along with the house rent revision was going to push up inflation numbers for January.

Overall, the increase in inflation was driven by transport, which shot up to 23.05pc and housing and utilities which rose to 15.53pc year-on-year.

Meanwhile, food inflation in urban areas increased to 13.57pc on a year-on-year basis while it saw a decrease of 1.06pc on a month-on-month basis. In contrast, food inflation in rural areas saw a slightly lower rise, increasing to 12.01pc YoY and 0.23pc MoM.

Non-food inflation increased to 12.8pc YoY in urban areas and 13.9pc YoY in rural areas.

The average inflation for the six-month period between July and December 2021 rose to 9.81pc on a yearly basis.

After surging to 12.4pc in February 2020, inflation had been on the decline — helped by a drop in prices of agricultural products. However, the massive spike in oil prices earlier in 2021 reversed this trend.

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Double-digit inflation among emerging risks

Last week, the Ministry of Finance (MoF) had identified the spread of the Omicron variant, external pressures on account of higher imports and double-digit inflation as emerging risks to an otherwise balanced growth trend.

"Though economic recovery is underway, the economy is also confronting the new Covid-19 wave, inflation and external sector pressure. The rising global inflation along with the significant increase in transportation cost and the subsequent supply chain disruption is expected to make international trade costly," the MoF's Economic Adviser's Wing (EAW) said in its Monthly Economic Update & Outlook.

"Inflation is high and YoY inflation is expected to remain in double digits in the coming month," the report had said. In this regard, it should be noted that the YoY increase in the CPI index is to a large extent a backward-looking indicator. It is not only determined by current price movements, but also by what happened 12 months ago, when international commodity prices were at the lower areas of their current price cycles, whereas now they are at the upper levels of these cycles.

Looking forward, what matters most is monitoring future MoM price movements. Containing these price dynamics is the most relevant issue because they will determine further developments in the consumer's cost of living, the report had noted.