ISLAMABAD: The headline consumer inflation eased to 11.1 per cent in July, the lowest in 33 months and significantly less than the 28.3pc reading in July 2023, official data showed on Thursday.

The deceleration is primarily due to falling food prices in urban and rural areas. During the month under review, there was a sharp drop in the prices of wheat, wheat flour, chicken, and vegetables like onions.

The easing of inflationary pressures led to another 100 basis point cut in the SBP’s policy rate to 19.5pc. Previously, it was cut to 20.5pc from 22pc, which was done after nearly four years.

In FY24, the annual inflation exceeded its budgetary target, reaching a staggering 23.41pc due to increased rates of electricity, gas, and essential kitchen items. The projected target was 21pc for the outgoing fiscal year. A basket of goods measures the headline inflation and services called the Consumer Price Index (CPI).

Slows to 11.1pc due to falling food prices

The index slightly increased 2.1pc from June. The government slapped a sales tax on food items in the budget, raising their retail prices even further.

Independent economists attribute the low inflation in June to last year’s high base, no discount rate increase, and stability in global commodity prices. They say the Pakistan Bureau of Statistics (PBS) measures inflation from last year’s high base. The lower rate did not mean prices did not increase or drop in July.

In July, urban inflation was 13.2pc year-on-year and 2pc month-on-month, slightly down from 14.9pc and 0.6pc in June. Rural inflation was 8.1pc year-on-year and 2.2pc month-on-month, going down from 9.3pc and 0.3pc in the previous month.

Food, core inflation

Food inflation for July stood at 3.4pc in urban and 1.3pc in rural areas, whereas non-food inflation was 20.7pc in urban areas and 15.5pc in rural areas. Food inflation dropped to a single digit at 9.4pc in October 2021. Since then, it has progressively increased, hitting an unprecedented level at 48.1pc in May 2023.

Core inflation, which strips out volatile food and energy prices, was recorded at 11.7pc in urban areas and 16.9pc in rural areas.

Main contributors

In urban areas, the food items whose prices rose month-on-month in July were tomatoes (75.8pc), fresh vegetables (29.7pc), milk powder (17.3pc), pulse gram (15.4pc), besan (13.3pc), chicken (9.9pc), pulse moong (8.8pc), wheat flour (8.2pc), potatoes (8pc), gram whole (6.8pc), fresh milk (5.3pc), wheat (4.9pc), fresh fruits (4.4pc), milk products (3.3pc), wheat products (3pc), honey (2.4pc), pulse mash (2.3pc), pulse masoor (2.3pc), pan prepared (2.1pc), beverages (1.9pc), sugar (1.7pc), eggs (1.6pc), and cigarettes (1.3pc).

In contrast, prices of onions (9.7pc), bakery and confectionery (1.2pc), and fish (0.2pc) declined month over month.

Published in Dawn, August 2nd, 2024