Inflation eases, but prices of consumer goods still highest in two years

Published March 2, 2022
People buy vegetables at a market in Islamabad. Food inflation is still on the higher side in urban areas as it shot up to 14.3pc in February on a yearly basis and 2.2pc on a monthly basis.—AFP file photo
People buy vegetables at a market in Islamabad. Food inflation is still on the higher side in urban areas as it shot up to 14.3pc in February on a yearly basis and 2.2pc on a monthly basis.—AFP file photo

ISLAMABAD: The prices of consumer goods have slowed slightly to 12.2 per cent in February from 13pc from the previous month, yet continue to be the largest increase recorded in two years, according to the Pakistan Bureau of Statistics (PBS) data released on Tuesday.

Inflation — measured by the Consumer Price Index (CPI) — is at its highest level in 24 months — driven by a record rise in energy prices, higher food rates undermining earlier gains.

The recent rise in oil prices in February was the highest ever in the country’s history, expected to lead to an increase in the cost of food items resulting from higher transportation charges. The year-on-year increase in inflation in recent months is mainly driven by soaring prices of fuel, electricity, house rent, transport and non-perishable food items.

Prime Minister Imran Khan has not just avoided passing the burden of increase in fuel prices to consumers, but gone a step ahead and decreased petroleum products’ prices by Rs10 per litre. Similarly, the decision to reduce Rs5 in electricity charges will reduce bills for consumers.

Energy Minister Hammad Azhar claims the government will absorb the Rs4-5 per unit rise in prices of imported fuels for residential and commercial consumers. He further said the decision to reduce petrol/diesel prices by Rs10 per litre will be achieved by reducing petroleum development levyin the short term and a funded subsidy in the long run.

These factors are likely to contain the non-food inflation in the country. Though food inflation is still on the higher side in the last eight months; in urban areas, it shot up to 14.3pc in February on a yearly basis and 2.2pc on a monthly basis, whereas the respective growth in prices in rural areas was 14.6pc and 2.6pc.

However, PBS data showed that in rural areas, non-food inflation was higher than that recorded in urban areas — a reversal of the trend where urban areas usually experience higher inflation.

According to a Finance Ministry report, the average month-on-month inflation in the last two months has declined significantly. But in January, international oil prices accelerated again due to geo-political tensions.

The deceleration of international oil prices and the government policies devised to balance the pass-through of global commodity prices into domestic retail rates have contributed to this moderation.

International food prices were on the rise again, while both these inflationary shocks were tempered somewhat by the strengthening of the rupee exchange rate to the US dollar in January. The continuous MoM rupee depreciation since April 2021 came to an end in January due to which the YoY inflation in February slightly decelerated.

In Pakistan, the average inflation between July 2021 and February 2022 rose to 10.52pc on a yearly basis. After surging to 12.4pc in February 2020, inflation had been on the decline — supported by a drop in prices of agricultural products. However, the massive spike in oil prices earlier this year reversed this trend.

In 2020-21, annual CPI inflation was recorded at 8.90pc against 10.74pc the previous year.

At the same time, prices of meat, fruits and vegetables have also registered a persistent increase in major urban and rural centres.

Non-food inflation in urban centres increased by 9.9pc year-on-year and 0.2pc month-on-month, whereas in rural areas it rose by 12.2pc and 0.4pc, respectively. The increase in non-food inflation was mainly driven by a hefty rise in oil prices in February.

Food items that saw an increase in prices in February as compared to the previous month, included tomatoes at 191.72pc, chicken 11.61pc, vegetables 10.69pc, fruits 7.32pc, mustard oil 6.04pc, fish 3.31pc, pulse gram 2.88pc, vegetable ghee 2.68pc, cooking oil 2.27pc, chickpea flour (besan) 1.99pc, rice 1.80pc, gram whole 1.58pc, meat 1.25pc and pulse masoor 1.18pc.

In urban areas, the prices of eggs declined by 11.82pc, potatoes 9.68pc, onions 8.81pc, condiments and spices 6.47pc, sugar 3.96pc and pulse moong 0.74pc.

The core inflation in urban areas was 7.8pc in February against 8.2pc the previous month. In rural areas, the corresponding increase was 9.4pc against 9pc.

Average inflation measured by the Sensitive Price Index eased to 18.7pc in February from 20.9pc a month earlier, while the Wholesale Price Index fell to 23.6pc during the month under review from 24pc.

Published in Dawn, March 2nd, 2022

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