Inflation stabilises at 8.4% in August

Pace of increase in prices of non-food items slows but food inflation remains high

ISLAMABAD:

The inflation rate stabilised at 8.4% in August 2021 due to deceleration in the pace of increase in prices of non-food items, but food inflation remained high across the country, the Pakistan Bureau of Statistics (PBS) reported on Wednesday.

The Consumer Price Index (CPI) stood at 8.4% for the second successive month compared to a year ago. The pace of inflation was slightly better than expectations of 9% to 9.7%. The Ministry of Finance and market surveys had suggested around 9% inflation rate for August.

The inflation rate in urban areas decelerated marginally to 8.3% but increased in rural areas to 8.4%.

The PBS reported over 40% increase in prices of cooking oil in rural areas while there was also a 36% increase in vegetable ghee prices.

The essential food item prices have been increasing in double digits for a longer time despite clear focus of Prime Minister Imran Khan to curb those.

The surge came amid a sharp fall in the value of the rupee in three months to Rs167 to a dollar on Wednesday. On May 3, the rupee had traded at Rs153.36 to a dollar, which lost Rs13.64, or 8.9% of its value, in just three months.

The reduction in the value of the rupee is pushing up the cost of every imported commodity including wheat, sugar, cooking oil, crude oil and raw material for industries.

Food inflation spiralled in cities to 10.2% and in villages and towns to 9.1% - a jump of nearly 2% in a month.

However, the non-food inflation rate decelerated to 7.2% in urban areas and to 7.7% in rural areas in August, according to the PBS.

Core inflation - calculated by excluding food and energy items - also slowed down to 6.3% in urban areas in August, reported the national data collecting agency.

The food group saw almost double-digit increase in prices in August compared to the same month a year ago.

Within the food group, prices of non-perishable food items rose 11.1% on an annualised basis and prices of perishable goods increased 3.4% due to seasonal smooth supplies.

The inflation rate for housing, water, electricity, gas and fuel group -having one-fourth weight in the basket - increased to 9.2% last month.

Average prices for the clothing and footwear and transportation groups rose 8% in August.

Medicine prices and doctors’ consultancy fees were also on the rise and as a result the health group inflation rate rose by 8.5% last month, according to the PBS.

The PBS reported that rates of cooking oil increased over 40%, followed by 37% increase in vegetable ghee rates, pushing the cost of running a kitchen significantly higher.

Prices of various types of vegetables also increased over one-fifth last month. Egg prices, which often remain low in summer, also increased by nearly one-fifth.

Meat prices rose by 16%, followed by 10.5% increase in chicken rates, according to the PBS.

Prices of sugar increased by one-tenth despite the reduction in sugar rate by the government only for the purpose of working out GST by the Federal Board of Revenue (FBR).

Last week, the Economic Coordination Committee (ECC) of the cabinet allowed import of the most expensive sugar at Rs106 per kg and wheat at over Rs61 per kg to meet domestic needs.

In the non-food group, the prices of liquefied hydrocarbons increased nearly 50%, petrol 14.6%, hosiery 144% and clinic fee over 12%. The cost of construction increased in double digits.

The average inflation rate for the July-August period stabilised at 8.4% during the current fiscal year. The government has set the average inflation target for the fiscal year at 8.5%, indicating that the year-on-year inflation may remain in double digits in fiscal year 2021-22.

Published in The Express Tribune, September 2^nd, 2021.

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