Inflation burden hits 14-year high in July – Newspaper

Irfan Khan

• Transport index sees largest year-on-year increase of 64.73 pc
• Perishables increased by 32.93 st
• Non-perishable food 28.12 pcs

ISLAMABAD: Rising food and energy prices pushed inflation up 24.93 percent in the first month of the new fiscal year — the highest jump in more than 14 years.

The month-on-month rise in inflation measured by the consumer price index (CPI) was 4.35 pc in July. rose compared to the previous month, according to data released Monday by the Pakistan Bureau of Statistics.

The spike comes as fuel prices skyrocketed since the last week of May after the new coalition government cut costly fuel subsidies in a bid to contain the rising budget deficit and revive the International Monetary Fund’s (IMF) stalled lending program.

The last time prices rose so rapidly was in November 2008, when the CPI was recorded at 24.3 pc. The index has remained largely below 15 percent since then, with a few exceptions. It was a sharp rise in headline inflation – May by 13.8 pc. and June with 21.3 pc.

On an annual basis, the transport index saw the largest increase at 64.73 pc. in July, followed by perishable foods 32.93 pc, non-perishable foods 28.12 pc, restaurants and hotels 24.97 pc, alcoholic drinks and tobacco 22.48 pc. , housing and utilities 21.78 pc. and maintenance of furniture and household equipment 19.69 pc.

In other categories, inflation for education and communication was 9.79 percent and 4.09 percent, respectively, recreation and culture 15.41 percent, clothing and footwear 14.57 percent and health 11.22 percent.

The country has been struggling with high inflation in recent months. Despite rising global oil prices, then-Prime Minister Imran Khan continued with fuel and power subsidies in March as he faced mounting dissatisfaction with his way of handling the economy and rising inflation.

Mr Khan was ousted in April by a vote of no confidence in parliament, and the new government began to roll back the costly subsidy, aligning it with the world price two months ago.

In addition to the CPI, other inflation indicators, such as the sensitive price indicator (SPI) and the wholesale price index (WPI), also experienced significant peaks in July. The SPI rose to 28.2 percent in July, from 21.7 percent a month earlier and 16.2 percent in the same month last year. The WPI amounted to 38.5 pc. in July, compared with 38.9 pc. in the previous month and 17.3 pc. a year ago.

Last week, the Monthly Economic Update and Outlook for July reported that annual inflation, which has remained in double digits since November 2021, would continue into July. The outlook said that not only international commodity prices, especially oil and food, but also a depreciation in the exchange rate affected domestic inflation. It admitted that inflation, especially in the past two months, has also been the result of supply shocks, the impact of which has overshadowed the government’s efforts to maintain prices.

The outlook warned that the prevailing political unrest was creating governance problems and exacerbating market uncertainties already caused by low foreign exchange reserves and external pressures.

Official data showed that food inflation remained on the higher side in July, rising to 27.4 pc. year-on-year and 4.3 pc. month-on-month in urban areas, while the respective price increase in rural areas is 29.6 pc. and 3.7 pc. — a reversal of the trend where urban areas usually have higher food prices.

At the same time, the prices of ghee, cooking oil, meat, fruits and vegetables also continued to rise in major urban and rural centers and traders made inappropriate use of an ineffective price regulation system.

Foods whose prices rose in July compared to the previous month included vegetables (25.14 pcs), pulse gram (13.87 pcs), onions (13.65 pcs), potatoes (10.87 pcs), besan ( 10.01 pcs), wheat (9.76 pcs), pulse mash (9.73 pcs), pulse masoor (9.01 pcs), tea (8.98 pcs), eggs (8.09 pcs), cooking oil ( 7.66 pc), wheat flour (6.34 pc), gram whole (5.36 pc), rice (5.16 pc), vegetable ghee (5.11 pc), milk (3.84 pc) and pulse moong (2.67 pcs). In urban areas, however, tomato prices fell by 12.46 pc, fruit by 7.11 pc. and chicken with 3.02 pc.

A similar trend was noted in the prices of essential foodstuffs in rural areas.

Non-food inflation in urban centers rose to 21.3 percent year-on-year and 4.6 percent month-on-month, while in rural areas it rose to 24.5 percent and 4.6 percent, respectively. The rise in non-food inflation was mainly driven by unprecedented increases in oil prices.

In the non-food category, the items whose prices rose in July compared to the previous month were: electricity costs (39.35 pc), motor fuel (7.35 pc), building materials (3.18 pc), laundry soap/detergents /matchbox (2.45 pc), cotton cloth (2.21 pc), liquid hydrocarbons (1.99 pc), electrical appliances (1.48 pc), plastic products (1.40 pc) and furniture & furnishing (1 ,30 pcs).

Core inflation in urban areas was 12 percent in July, up from 11.5 percent in the previous month. In rural areas, the increase was 14.6 percent against 13.6 percent. This shows that the rise in interest rates also failed to stop the upward trend in core inflation.

Published in Dawn, August 2, 2022

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