ISLAMABAD: The annual inflation maintained a sharp deceleration trend, hitting an 81-month low at 4.1 per cent in December due to a decrease in the prices of perishable food products.

The current situation in Pakistan reflects disinflation, which signifies a slowdown in inflation. In contrast, deflation occurs when the general price levels decline.

According to the Pakistan Bureau of Statistics, the average accumulative inflation over the last 47 months increased by 81.51pc, reflected in the retail prices of all consumer items during the period under review. This low inflation does not reflect that the cost of living has come down.

The average inflation for six months (Jan-June FY21) was 9.2pc, followed by 12.5pc in FY22, 29.18pc in FY23, 23.41pc in FY24, and 7.22pc in the first half of FY25. The data shows a price rise since January 2021, contradicting the government’s assertions that prices have declined.

The headline inflation, measured by the Consumer Price Index (CPI), had slowed to 9.6pc in August, the first single-digit reading in more than three years, according to data released by the Pakistan Bureau of Statistics on Wednesday.

The CPI inflation surged above 10pc in November 2021 and remained in double digits for 33 consecutive months until July. In between, it peaked at 38pc in May 2023, driven by unprecedented food and energy prices.

Improved crop yields, particularly of wheat, rice and sugar, helped reduce food prices this year, alongside a lower reliance on imports. The government’s support for agriculture, including increased loans and favourable weather, played a crucial role in boosting production.

In the first half of FY25 (July-December), inflation averaged 7.22pc compared to 28.79pc during the same period last year. Analysts attributed the decline to lower global commodity prices, stable exchange rates and better agricultural outputs.

The IMF revises down inflation forecast to 9.5pc from 12.7pc for FY25. In December, urban and rural inflation was 4.4pc and 3.6pc year-on-year.

Food, core inflation

Food inflation for December stood at 2.5pc in urban areas and -0.2pc in rural areas, whereas non-food inflation was 5.7pc in urban areas and 7.6pc in rural areas. Food inflation was 9.4pc in October 2021. Since then, food inflation has progressively increased, with a record 48.1pc reported in May 2023.

Core inflation, which strips out volatile food and energy prices, was recorded at 8.1pc in urban areas and 10.7pc in rural areas in December. In the past 12 months, core inflation in urban areas was recorded at 18.4pc in July 2023.

Main contributors

In urban areas, the food items whose prices saw the month-on-month (MoM) decline in December included chicken (13.06pc), pulse gram (6.94pc), onions (4.91pc), tomatoes (3.28pc), condiments and spices (2.60pc), pulse mash (2.59pc), besan (2.55pc), fresh vegetables (2.27pc), gram whole (1.49pc), wheat flour (0.99pc), pulse masoor (0.75pc), rice (0.74pc), gur (0.50pc) and wheat products (0.36pc).

The MoM increase was recorded in prices of potatoes (12.42pc), fresh fruits (8.84pc), vegetable ghee (5.42pc), cooking oil (4.39pc), mustard oil (2.96pc), honey (2.69pc), sugar (2pc), fish (1.82pc), eggs (1.01pc), meat (0.81pc), beans (0.56pc), dry fruits (0.32pc), wheat (0.27pc), beverages (0.23pc), pulse moong (0.20pc), milk products (0.05pc), milk powder (0.03pc) and milk fresh (0.02pc).

Published in Dawn, January 2nd, 2025