Pace of inflation lowest in five months
The pace of inflation slowed down, for the third month in a row, to 8% in December 2020 over a year ago due to improvement in supplies of perishable food items but an upward spiral in rates of non-food goods continued during the month.
Measured by the Consumer Price Index (CPI), prices of goods and services increased at a rate of 8% in December over the same month a year ago, reported the Pakistan Bureau of Statistics (PBS) on Friday. It was the third successive month which saw the CPI slow down. On a month-on-month basis, the index receded 0.7% in December over November, according to the PBS.
The 8% inflation was the lowest in five months, providing a ray of hope that people may get some relief from higher prices at a time when their real wages are shrinking. The 8% inflation rate was still double than the inflation reading in some regional countries.
Core inflation, measured by excluding food and energy goods from the commodities’ basket, slightly accelerated to 7.7% in December over November in rural areas, according to the PBS. In urban areas, the core inflation remained unchanged at 5.6% for the third successive month.
The Planning Commission recommended last month a reduction in the key policy rate to support economic growth. The State Bank of Pakistan (SBP) has maintained the interest rate at 7%.
The overall inflation rate has slowed down due to improvement in perishable food supplies, though prices of nonfood items are still increasing. The rate of increase in food item prices in urban areas decelerated from 13% to 12.6% in December.
In rural areas, it slowed down from 16.1% to 13.4% that pulled the overall inflation rate down, reported the data collecting agency. Still, the goods the consumers were buying were expensive by nearly 14% over a year ago.
The average increase in prices of perishable food items group actually reduced by less than half per cent last month over a year ago, according to the PBS. Prices of food and nonalcoholic group increased 13.3% from a year ago. Nonperishable food group prices rose about 16.3%, according to the PBS.
However, chicken was expensive by 67% and eggs by almost 64% last month due to their increased demand in winter. Potatoes were expensive by 38%.
Despite Prime Minister Imran Khan’s interest in controlling prices of wheat, wheat flour and sugar, the rates have remained high.
In case of wheat and wheat flour, the PBS reported a reduction in prices on a monthly basis but these commodities were still dearer compared to a year ago. The federal government’s decision to import and export wheat and sugar has a direct bearing on prices in the domestic market.
The government has failed to ensure availability of sugar and wheat at affordable prices, particularly for the low-income groups.
The PBS reported that wheat prices increased 24.2% in December over the same month a year ago in urban areas and 28.1% in rural areas.
Prices of wheat flour rose 15.8% in rural areas. Sugar prices increased over 15% in December in cities and also surged in double digits in villages over a year ago, according to the data collecting agency.
There were surprising trends of increase in prices of wheat and sugar in the wholesale market. Sugar prices were 61% higher in December in the wholesale market as compared to a year ago.
Similarly, wheat flour prices were 24% higher in the urban wholesale market and 28% up in the rural wholesale market.
On a monthly basis, electricity prices rose 6% in December over the previous month as the government started gradually passing the increase on to end-consumers.
PM Imran has also given the go-ahead to the increase in annual electricity tariffs to meet the demand of the International Monetary Fund (IMF) for the restoration of the suspended bailout programme.
Average inflation rate in the first half of current fiscal year (July-December) stood at 8.6%, according to the PBS. The average rate of inflation in urban areas was 7.3% and in rural areas it was 10.6%.