Food price spike fuels inflation in March

Published April 2, 2022
MULTAN: Labourers unload sacks of onion from a truck at Sabzi Mandi.—APP
MULTAN: Labourers unload sacks of onion from a truck at Sabzi Mandi.—APP

Inflation measured by the Consumer Price Index (CPI) has been at its highest level since January 22, driven by a record rise in energy prices and food rates undermining earlier gains. In January, inflation was recorded at 13pc, while the second-highest increase of 12.4pc was noted in February 2020.

ISLAMABAD: The prices of consumer goods slightly went up to 12.7 per cent in March from 12.2pc from the previous month on the back of an increase in prices of perishable products, according to the Pakistan Bureau of Statistics (PBS) data released on Friday.

Prime Minister Imran Khan had reduced oil prices in March. Frozen at the current level for the month of March, the oil prices will continue at this level until June 30. Sales tax on all POL products has been reduced to zero, which cost the tax body Rs45bn in March to provide relief to consumers.

Similarly, the decision to reduce Rs5 in electricity charges will reduce bills for consumers. These factors are likely to contain non-food inflation in the country. The year-on-year (YoY) increase in inflation in recent months is mainly driven by soaring prices of fuel, electricity, house rent, transport and non-perishable food items.

The Ministry of Finance in its March update said the global economy was facing three challenges including financial sanctions, commodity prices and supply-chain disruptions due to the ongoing war between Russia and Ukraine. These challenges have fueled global inflation and downgraded the growth outlook in most countries, it added.

According to the report, the necessary condition to bring back inflation is to limit further month-on-month (MoM) price increases as much as possible. Thus, realising the fact, the government policies continuously focused on limiting these monthly increases.

Currently, due to increased geopolitical tensions, there are expectations about a further increase in international commodities prices. The government is taking possible measures to contain the current pass-through of this increase into domestic consumer prices, especially through relief packages.

The PBS data show that food inflation is still on the higher side in the last nine months; in urban areas, it shot up to 14.5pc year-on-year in March and 1.8pc month-on-month, whereas the respective growth in prices in rural areas was 15.5pc and 2.3pc.

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.

In Pakistan, the average inflation between July-March rose to 10.77pc year-on-year. 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 also registered a persistent increase in major urban centres and rural areas.

Non-food urban inflation increased by 10.4pc YoY and 0.1pc MoM, whereas in rural areas it rose by 12.5pc and 0.2pc, respectively. The increase in non-food inflation was mainly driven by rising oil prices in March.

Food items that saw an increase in prices in March as compared to the previous month, included chicken 33.63pc, fruits 15.17pc, mustard oil 8.73pc, vegetable ghee 8.32pc, onions 7.01pc, cooking oil 5.05pc, gram whole 2.11pc, tea 1.92pc, milk 1.52pc and besan 0.91pc.

In urban areas, the prices of tomatoes declined by 36.53pc, eggs 14.75pc, wheat 4.89pc, potatoes 3.68pc, condiments & spices 2.38pc, gur 1.10pc, wheat flour 1.08pc and sugar 1.02pc, respectively. A similar trend was noticed in the prices of essential food items in the rural areas.

The core inflation in urban areas was 8.9pc in March against 7.8pc the previous month. In rural areas, the corresponding increase was 10.3pc against 9.4pc.

Published in Dawn, April 2nd, 2022

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