Inflation sprints to 13.1%

Fuel, electricity and food prices pull up the index.

ISLAMABAD:

Strong inflationary pressure has started building up on the back of rise in fuel, electricity and essential item prices, as inflation rose 13.04 per cent in April over the same period a year ago.

Inflation measured by the Consumer Price Index – an indicator that measures price changes in 375 items – surged due to increase in prices of petroleum products, food items, electricity, house rent, apparel, textile and footwear, according to data released by the Federal Bureau of Statistics on Tuesday.

Out of 10 commodity groups, seven witnessed double-digit inflation, data reveals. The government has targeted to restrict inflation at 15 per cent while the State Bank of Pakistan is expecting 16 per cent price rise for the current fiscal.

For the next financial year, authorities have decided to restrict inflation at 12 per cent, which seems to be an uphill task due to the build-up of inflationary pressure.

Abnormal monthly rise

Finance ministry economists have attached great importance to the monthly rise of 1.62 per cent in inflation in April compared with March figure. The increase is very rare as the monthly inflation number tends to remain low. They have interpreted it as a leading indicator of high inflation in coming months.

The major reason behind the abnormal trend in April is the increase in prices of petrol, diesel, kerosene oil, transport fares, cotton cloth, readymade garments, fruits, vegetables and electronic goods. Besides increasing petroleum product prices, the government also levied taxes on textile, leather, carpets, plants and machinery in March to try and bridge the widening gap between national income and spending.

“There is no microanalysis of the impact of taxes on inflation but the levies must have impacted the normal inflationary trend,” said Statistics Division Secretary Asif Bajwa.

In the wholesale market, inflationary pressure is even higher than the retail market. According to the Federal Bureau of Statistics, inflation in the wholesale market rose by 2.26 per cent in April against March.

Independent economists say that the wholesale market inflation will start reflecting in the retail market within a year. However, Director General Statistics Arif Cheema said there was large variation between items of the Wholesale Price Index and the Consumer Price Index, thus it would not be appropriate to say that today’s wholesale market inflation will affect the retail market next year.

He said the wholesale market inflation index rose due to unprecedented increase in cotton prices that constituted 55 per cent of the WPI basket.

Overall, food inflation in April was registered at 17.3 per cent. Break-up reveals that fresh milk price rose 21 per cent, meat 24.5 per cent, vegetable ghee 37.4 per cent and fresh fruits 45.2 per cent.

Average inflation during the first 10 months of the current financial year (July 2010 –April 2011) remained at 14.1 per cent. During the period, moong pulse price increased 90 per cent, tomatoes almost 75 per cent, onion 51 per cent, spices 40 per cent and vegetables 33 per cent. The cost of communications increased over 33 per cent, jewellery price rose 30 per cent and electricity tariffs 21 per cent.

Published in The Express Tribune, May 4^th, 2011.