For the first time in the last 11 years, inflation dropped to 3.96% in November on the back of a steep fall in prices of petroleum and food groups, beating even expectations of the government that estimated the figure at around 5.5%.
The slowdown in the pace of increase in prices measured by the Consumer Price Index (CPI) compared to November last year was reported by the Pakistan Bureau of Statistics (PBS) in its monthly inflation bulletin on Monday. It was the lowest level since November 2003 when the index stood at 4.2%.
The CPI covers price movements in 481 commodities every month.
Falling prices of oil and commodities in the global market led to the reduction in rates of petroleum products at home.
Though the government has passed on the impact of oil price dip to domestic consumers, they are yet to enjoy the benefits of falling global prices of palm oil, wheat and rice.
Last month, prices of kerosene oil were reduced by 12.25% and motor spirit (petrol) by almost 10%, said the PBS. However again, it did not include the two surcharges imposed on electricity consumers into the calculations, raising doubts about the credibility of numbers.
The electricity bills for November include the Universal Obligation Fund surcharge at Rs1 per unit on people consuming between 301 and 700 units and 50 paisa for consumption of over 700 units.
Similarly, a debt servicing surcharge of 30 paisa per unit has also been included in the bills. Both the surcharges are above the 30 paisa per unit revision in power tariff under the monthly fuel price adjustment for August and another 51 paisa per unit for September, according to media reports, which the government did not deny.
According to the PBS, food inflation in November stood at 2.1% year-on-year – the index had been recorded at 5.2% in October. It showed a decline of 3.1 percentage points in a single month.
On a monthly basis, overall prices decreased in November against October as the index was negative 0.4%.
The pace of increase in non-perishable food items was recorded at 3.6% in the month compared to November last year. Prices of perishable food items, however, decreased 10.6% year-on-year.
Fuel and food-adjusted inflation, called core inflation, also slowed down to 6.9% year-on-year with a reduction of 0.9% in a single month.
With the slowdown in both core inflation and the headline inflation, the SBP may have to further cut its discount rate. In the last announcement, the SBP lowered the discount rate by 50 basis points to 9.5%.
Average inflation during first five months of the current fiscal year (July-November) was registered at 6.45% compared to the corresponding period of previous year, according to the PBS. For this year, the government has set the inflation target at 8%.
Published in The Express Tribune, December 2nd, 2014.
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COMMENTS (17)
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@Adnan: The realistic backing is their. As oil decreases the petro dollars which were flowing to Middle Eastern countries will move back towards the consumers of European countries and America. Inflation rate itself does not suggest anything. It is the core inflation which suggest the real trend. The deflation right now in European countries is due to lower demand. But with more money saved from lower oil prices will push the demand of other items which will eventually increase the core inflation which is non-oil non -food. This will happen not only in Europe and America but also in countries like Pakistan where people will start spending more on items like appliances. And i think you know better than me which countries produce these products (Pakistan only assembles them). The agriculture economy is going to take a big hit in Pakistan and India but the urban population will be the real beneficiary and with Pakistanis having no saving habits will start buying these items as we saw during the Musharaf era. Nothing new every thing has happened before and we are again in the same cycle. But his time we are not positioned as favurable as in the time of Musharaf.
@Ali Zaidi - Well said.
@Waseem Ahmad - Your analysis were good but had no realistic backing
@Liaqat Ali - Blame no one, because things have become such after 60+ years of foolish deicision making+corruption, so it needs time rather than blame game
@Grace - Not one person or tenure of 5 years of power can change things around. It has taken 60+ years to get worsen, it would take another 60+ to become normal and then onwards it may rise.
I am thankful to ALLAH that our media has got some independence, though Army recently showed its supreme power by not only getting GEO shut but sentencing 26 years jail to its head. But believe me an informed audience is a great force and would take justice from any power of the world. Just needs time with determination and consistency.
Last but not least, not Imran Khan or any one else can bring change, change is a slow process, it has to be brought about in phases, Imran Khan's thinking is real good one for people like you and me, but he needs to transform KPK in a place he think all of Pakistan should become and then spread that to whole of Pakistan. If KPK is a success, people will vote him automatically as Actions speak louder than words ...
@Ali Zaidi: Another Article for You to read. http://www.washingtonpost.com/business/economy/2014/12/01/904984b2-7971-11e4-9a27-6fdbc612bff8_story.html
@Ali Zaidi: Please Read. Lower Oil Prices Will Help Boost Global Economy, IMF’s Lagarde. http://online.wsj.com/articles/lower-oil-prices-will-help-boost-global-economy-imfs-lagarde-says-1417479908.
@Ali Zaidi: Dear Sir which countries are on the verge of economic collapse in Europe except for the ones which have already collapsed. Germany has a very resilient economy. They might go into red but ultimately driven by their exports to US (Which is growing at an exponential pace due to increase in their domestic demand) and with new stimulus coming from Japan and rates cut in China the economies of all these countries will again recoup their losses especially when their will be a decrease in inflation in less developed and developing countries which will increase investment in capital their (i-e India). One of the biggest gainer in the decrease of oil prices will be Europeans as they are importing huge amount of oil from Russia. This price decrease will increase the disposable income of the people their which will help push the demand. Similarly even if your comment does happen to be correct then their will be an even bigger problem for us because we have only recently received the GSP Plus status and decrease in demand will again go against us. So all in all not a very good situation for Pakistan no matter what scenario you create. As all your increase in textile is coming from exports to Europe instead of other regions like America. We cannot predict much with the data we have about these economies but we have seen how America has risen from the Ashes (2008 Collapse). Who could have predicted that only 2 years back. That just gives you an idea about how less we know about these economies. They are very competitive unlike us.
No it does not......because lower oil prices has NOT translated into lower price of rice, wheat, sugar, vegetables, milk, cooking oil, transport fares, school fees etc......this simply looks like creative financial lingo to drop the bank rate by another fifty basis points, to make someone happy.
@Waseem Ahmad: Sir, I'd request you to understand economics instead of giving generalized statements. Europe is on the verge of an economic collapse as deflation has slowed down the industrial growth. So, your basic assumption that Europe is going to benefit from the situation is incorrect. Get your spectrum right, sir, before you educate others about global economy :)
@Liaqat Ali: I did not blame them at that time because i knew but i think you did not blame them at that time either. At that time you were saying it was due to high international oil prices (as did I) and now because of Nawaz Sharif it has come down. I never said that the prices are lowered in Pakistan because of IK just like the close aide of Nawaz Sharif Mr. Najam Sethi is saying. So if you say the benefit goes to Nawaz Sharif than it means it is him that we should curse for increase in electricity prices and gas prices. I think you will speak against Nawaz Sharif for that. Other than that what i wrote above is just an analysis. These things have happened with us before and is going to happen again. Just watch and wait.
@Grace:
please wake up and realise that there is a world out there that is currently facing an oil price slide...with associated after effects.
NS and Imran do not have anything to do with this....yes Imran does have the affect of pressurizing the sitting govt to reduce prices to divert attention from the dharna....otherwise the PML N and PPP would have enjoyed the windfall themselves without transferring it to you or me.
@Waseem Ahmad: Wasnt it the Govt. who got all the balme when the international prices of oil were going up and inflation all over the place in Pakisytan as a result . Or were you and PTI giving blame to others and protevting Govt at that time ? If you behaved like that at that time then yes dont give any credit to Govt now. But no you didnt . You and PTI govt then but now dont want to give them credit. What a contradictioin and duplicity . Deception at itys peak by PTI.
@Grace: So it was Nawaz Shariff who told the Americans how to dig out Shale Oil and Gas which pushed the international oil prices lower and hence helping with lower inflation. Do not worry the same thing happened in 2008 when the oil prices crashed to around $40/barrel but then we saw a big come back. Second thing is those who are thinking that this is going to help countries like Pakistan is greatly mistaken. Only those countries which produce finished goods like China, Europe and America will benefit from this scenario while countries like India, Pakistan, Saudi Arabia, Russia etc. will face the real challenge as the raw materials costs are going down but the finished goods costs are not going to go down at the same pace which will increase the trade deficits for countries like us which import finished goods. Similarly with oil prices going lower the investment by the oil rich Middle Eastern countries will also go down due to which a lot of Pakistanis working in those countries will be removed from their jobs and sent back to Pakistan which will decrease our remittances and increase unemployment. With oil prices going lower the cotton prices are also going further down and we have already seen a crash in the price of rice. So your exports are also seeing a decrease of more than 8% in the last 6 months. While on the other hand the imports are going up at about 10% per annum. And with other countries currencies falling against the dollar and ours unnaturally kept higher through loans from multilateral donors, our exports are getting expensive and imports are getting cheaper which will push balance of payment into big negative hence pushing our foreign loans higher and their payments more unbearable for the country.
Sometimes I think and don't understand why do people dislike Imran khan? Why do they don't want change? Why do they want to stick to the old status-quo, why do they want their children to give vote to someone else and hence only bilawal and hamza taking turns, why do all of a sudden bhuttoism becomes their moto, why do all of a sudden people are happy with the old system of governance? the one were corruption, land grabbing and all sorts of mafias are involved. Is it because we are not yet ready for a change as a nation? Then so it be, all the middle and upper middle class society who are fed up with corruption, thefts, and other bad ills of the society should leave Pakistan and go live abroad since there is no hope for a change, because it is the poor class that has to unite as a nation to counter this corrupt system and bring change in it not the very few educated and or Liberal class.
Ohh no I sense PTI crying.
What was the Chief Economist of Pakistan doing??
Please cut the policy rate aggressively. It's time to give relief to the borrowers
Thank you Imran! God give you a long life and make your enemies impotent. Ameen
This is the real reason why Imran Khan wants to shut Pakistan down through agitation. He is afraid of the progress and investments being done under Nawaz Sharif. If Nawaz can do all this in under 2 years like stable rupee, lower inflation, more jobs, motorways and good economy how will Imran Khan ever convince public to vote for him?