Inflation surges to nine-year high

Dawn.com
Mubarak Jeb Khan


ISLAMABAD: Inflation rose to 12.7 per cent year-on-year, the highest level in nine years mainly driven by an increase in prices of food items, the Pakistan Bureau of Statistics (PBS) reported on Wednesday.
Inflation, measured by the Consumer Price Index (CPI), edged up by 1.3pc over the previous month after the PBS revised its calculation methodology by setting the new base year 2015-16 instead of the previous 2007-08 financial year.
Finance ministry in a brief statement claimed that inflation would come down from the next month without saying how they figured this.
The data released on Wednesday shows that higher prices of food items have been the largest driver in overall inflation in November. It has also been observed that the prices of essential food items are higher in rural areas than in urban areas.
Food inflation in urban areas rose by 16.6pc in November on a yearly basis and 2.4pc on a monthly basis and that in rural areas by 19.3pc and 3.4pc, respectively.
In urban areas, the food items which saw an increase in their prices are: tomatoes (149.41pc), pulse mash (11.72pc), pulse moong (7.79pc), wheat (6.86pc), potatoes (6.72pc), wheat flour (4.74pc), beans (4.53pc), onions (3.82pc), dried fruits (3.22pc), pulse masoor (2.66pc), mustard oil (2.49pc), pulse gram (1.94pc), milk fresh (1.42pc), cooking oil (1.2pc), fish (1.17pc), gram whole (1.04pc) and vegetable ghee (1pc). The prices of items that declined in urban areas are: fresh vegetables (11.52pc), chicken (2.28pc), sugar (1.18pc) and fresh fruits (1.03pc).
In rural areas, the items that witnessed an increase in their prices are: tomatoes (189.67pc), onions (13.83pc), wheat (10.85pc), pulse moong (8.55pc), beans (6.24pc), wheat flour (6.15pc), fresh fruits (4.68pc), potatoes (4.43pc), pulse masoor (3.89pc), dried fruits (3.05pc), cotton cloth (2.58pc), gram whole (1.48pc), eggs (1.31pc), fish (1.3pc), readymade food (1.19pc), rice (1.02pc) and pulse gram (1.01pc).
Similarly, non-food inflation in urban centres was recorded at 9.6pc year-on-year, while it was 9pc in rural areas. The rise in non-food inflation is mainly driven by an increase in oil prices over the past few months and a combined impact of depreciation of the exchange rate. The government passed on this increase to domestic consumers.
Non-food prices also remained under pressure on account of education index, which increased by 6.12pc. Clothing and footwear went up by 9.37pc, housing, water, electricity, gas and other fuel by 8.81pc, furnishing and household equipment by 10.84pc, health by 11.39pc, transport by 13.95 pc and recreation and culture by 6.8pc.
The change in base year means the economy’s price levels in FY16 will now be the base against which all existing prices will be calculated for the CPI.
Based on the new base year, inflation in November rose to 12.7pc from 11pc in the previous month.
Going by the old base year of FY08 that was being used until three months ago, the key inflation index comes in at 12.3pc for November, showing a 1.2pc increase over October.
The International Monetary Fund has estimated that Pakistan’s inflation may escalate up to 13pc, but the government’s estimate is between 11pc and 13pc for the current fiscal year.
The urban CPI covers 35 cities and 356 consumer items, while the rural CPI tracks 27 rural centres and 244 items. The former grew by 12.1pc year-on-year in November, whereas the latter jumped by 13.6pc.
The core inflation rate in urban areas was 7.5pc in November, according to the new methodology, as it dipped from 7.7pc. The core inflation rate in rural areas was 8.4pc in November, while it was 8.6pc in the previous month.
The central bank determines the key policy rate (which currently stands at 13.25pc) on the basis of the core inflation rate.
Average inflation measured by the Sensitive Price Index crawled up 14.22pc in July-November from 1.99pc during the same period last year, while the Wholesale Price Index went up 13.52pc from 16.99pc.

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