Inflation: CPI drops to below 13%

Slide in prices of commodities continues for second consecutive month, as inflation drops below 13 per cent.

ISLAMABAD:

A slide in prices of essential commodities continued for the second consecutive month, as inflation dropped below 13 per cent in February, a trend that may reverse in coming months due to an anticipated increase in fuel and electricity prices.

The Consumer Price Index (CPI) – a barometer to monitor change in prices of 375 goods and services – rose by 12.9 per cent in February, compared with the corresponding month of the preceding year, according to the Federal Bureau of Statistics on Thursday. The indicator is still slightly above the recorded inflation in July, the month when floods started, which ravaged one-tenth of the country.

A break-up of the CPI basket, consisting of 10 groups, shows that the 12.9 per cent increase in inflation is still largely because of a double-digit growth in food and beverage prices. In February, non-perishable food item rates soared by 16.5 per cent, while perishable food item prices increased by 28 per cent. Apparel, footwear and textile group prices increased 12.7 per cent, while transport and communications charges rose by 12.3 per cent.

In January, CPI dropped to 14 per cent after remaining above 15 per cent for five consecutive months. The floods choked the food supply chain, besides causing a loss of over $10 billion to economy, according to the Damage and Need Assessment report, jointly prepared by the World Bank and the Asian Development Bank.

“Reduction in prices of essential food items and the freeze on petroleum product prices for three months helped lower the inflation to 12.9 per cent,” said Statistics Division Secretary Asif Bajwa.

However, the trend may not continue in coming months, as the government has assured a visiting International Monetary Fund delegation that it would pass on the increase in international oil prices to end-consumers and raise electricity tariffs to cut subsidies to the power sector.

A Ministry of Finance official said that IMF and Pakistan have assessed an average 15 per cent inflation by the end of this financial year, after considering the impact of the anticipated increase in prices of electricity and petroleum products.

The FBS data showed that average inflation during the first eight months of the current financial year remained at 14.4 per cent.

According to the statistics, 0.8 per cent of the fall in CPI in February was a result of a drop of 100 per cent in prices of tomatoes, a decline of around 33 per cent in onion prices and a 25 per cent drop in egg prices per dozen.

Published in The Express Tribune, March 11^th, 2011.