Food price stability slows down pace of inflation

Consumer Price Index rises at 3.8% in October 2017

ISLAMABAD: The inflation rate decelerated slightly to 3.8% in October 2017 after food prices stabilised, but their price range remained significantly higher than last year due to supply shortages.

Measured by the Consumer Price Index (CPI), the inflation reading stood at 3.9% in September, the Pakistan Bureau of Statistics (PBS) said on Wednesday.

The deceleration was primarily because of food inflation that slid to 2.2% in October. Non-food inflation remained unchanged at 4.9%.

September was an unusual month when prices of food commodities skyrocketed due to supply shocks. This was not in line with the trend witnessed in the first two months (Jul-Aug) of the current financial year.



On the back of adequate food supplies and stable international commodity prices, the headline inflation had slowed down in the first two months of fiscal year 2017-18.

Owing to the slow pace, the average inflation in first four months (July-October) of FY18 stood at 3.5%, which was slightly lower than the pace recorded in the same period of previous year.

On a year-on-year basis, the non-food non-energy inflation, commonly known as core inflation, slightly decelerated to 5.3% in October, according to the PBS.



Among 89 commodity groups, the core inflation covers the price movement of 43 items. The SBP uses the core inflation while formulating its monetary policy.

The high core inflation was because of a surge in the cost of health care, education, transport and housing, said a PBS official. The cost of health care was higher by 10.6% in October than a year ago. The education cost rose 11.5% after educational institutions increased their fee for the new session, according to the PBS.

The SBP’s latest report on the economy states that the government will meet its 6% inflation target for the current fiscal year.

The assumption is based on expectations of better supply of food items, limited pass-through of international oil prices to the domestic market, a steady increase in domestic demand and improving consumer confidence in the economy, as reflected in results of the IBA-SBP Consumer Confidence Survey for July 2017.



The inflation bulletin showed that on a yearly basis onion prices surged 178.6%, tomato prices rose 71%, rice prices went up 13.8% and potatoes cost 12.2% more.

Tea rates jumped 11.1%, followed by meat at 7.5%, betel leaves and nuts 7%, eggs 6.72%, readymade food 6.57% and honey 6.3%.

Mash pulse prices fell 26.8%, gram pulse 21.6%, sugar 21.2%, masoor pulse 18.5%, moong pulse 18%, chicken 16.7%, cigarettes 16.5% and gram flour 14.3%.

In the category of non-food items, drug and medicine prices rose 15.7%, education 11.5% and motor fuel 9.7%. Construction wages increased over 7%, tailoring cost increased 7%, house rent 6.5%, cleaning and laundry 6.4%, medical tests 6.3% and clinic fee 5.7%.

Published in The Express Tribune, November 2^nd, 2017.

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