CPI drops by 2.8% to 23.8%

The pace of increase of consumer prices moderated to 23.8% in November due to improved food supplies –- barring onions –- but the inflationary pressures remained persistent, indicating no letup in a prolonged wave of price hike.

The Consumer Price Index (CPI), the inflation monitor, rose by 23.8% in November compared to the same period of last year, the Pakistan Bureau of Statistics (PBS) reported on Thursday. Despite around 2.8% slowdown in the index movement, the prices of the majority of the consumer goods remain out of reach of the people.

The inflation rate was in line with the Ministry of Finance’s expectations, which ranged from 23% to 25%.

The reason behind moderation in the inflation rate was a drop in the rate of increase in the perishable food items. Their prices group surged by 41% in November, which was quite a high rate but still lower than the preceding month.

The coalition government has stopped tracking the prices of the consumer goods, as it rarely convenes the meeting of the National Price Monitoring Committee.

The weekly price review is also no more part of the agenda of the Economic Coordination Committee (ECC) of the cabinet.

Food inflation surged by 29.7% in cities and 33.5% in villages and towns last month, showed the PBS data. Prices of both perishable and non-perishable food products went up significantly.

The food group prices surged by one-fourth in November compared to the same month a year ago. But prices of perishable food items soared by 41%, which still shows a significant demand and supply gap.

Prices of onions increased by 285% compared to a year ago followed by a 64% increase in rates of whole gram and 62% rise in rates of tea. Vegetable ghee and cooking oil prices surged up to 45%, wheat 43% and rice 40%, according to the PBS.

Prices of the alcoholic beverages and tobacco group soared by 36% while those of the clothing and footwear group surged by 19%.

Core inflation, which is calculated after excluding the volatile energy and food prices, increased in November by 14.6% in urban areas and 18.5% in rural areas. The core inflation is still higher than the State Bank’s upward revised policy rate of 16%, indicating the underline inflationary pressures.

The non-food inflation rate was 16.4% in cities and 21.4% in villages. Prices of the housing, water, electricity and gas fuels group were higher by nearly 10%.

The transport group saw a price hike of 44%, according to the PBS. Petrol was expensive by 52% compared to a year ago, followed by increase in prices of stationary, washing soap, transport services and accessories of vehicles.
Data further showed that the month-on-month inflation rate slowed down to less than 1% in November.

For the July-November period of the current fiscal year, average inflation came in at 25.1%, which was more than double the official target of 11.5% for the current fiscal year, set before the floods.

The central bank, whose core responsibility is now containing the inflation, last week increased its annual forecast range to 21-23%. The amended State Bank of Pakistan law makes the central bank responsible for containing inflation and ensuring price stability. But the law does not suggest any penalties for missing the inflation target.

The continuous surge in inflation indicates the failure of the ruling alliance, which has not been able to check price hikes. It has rather contributed to the inflation by increasing taxes, even more than that asked for by the International Monetary Fund.

The central bank last week increased the interest rate to contain inflation, which is largely the result of currency depreciation, shortage of food items and the administrative increase in the prices of fuel and electricity.