Following a downward trend: Inflation trickles down to single digits after six months

CPI shows declining trends; double-digit core inflation remains a concern.

Shahbaz Rana August 01, 2012


The inflation rate has trickled down to single-digits in July 2012 on a yearly basis after remaining in double-digits for the past six months, according to the Pakistan Bureau of Statistics (PBS).

The consumer price index stood at 9.6% in July 2012 over July 2011 and showed declining trends, particularly in food items, said the PBS on Wednesday. The inflation rate does not include the impact of the last hike in petroleum products and compressed natural gas prices.

The inflation rate in the first month of the fiscal year is in line with the annual target of 9.5%. The Ministry of Finance has targeted the single-digit inflation for 2012-13 on back of considerable improvement in the supply of essential items during the last fiscal year.

Asad Sayeed, an independent economist working with the Collective Social Science for Research, said that inflation will fluctuate around 10% during the fiscal year 2012-13. He, however, cautioned that government’s continuous printing of notes to finance the budget and volatility in the international oil prices could drive the prices up.

However, it seems that the government will keep printing currency similar to previous fiscal year due to increasing expenditures and declining revenues. According to the provisional estimates of the Federal Board of Revenue, in July the authorities collected slightly over Rs111 billion in taxes, which are Rs1.5 billion less than the collection in July last year. The collection is only 4.6% of the annual target of Rs2.381 trillion.

While the general inflation has temporarily come down, the non-food and non-energy inflation, known as the core inflation still remains a concern. The core inflation, even a more significant measure to check the inflationary trends, remained in the double-digits and registered a 1.8% increase to 11.3% from July 2012 over July 2011, said the PBS.

The PBS has attributed the consistent double digit core inflation to hikes in the prices of clothing, footwear, health, transport, education and restaurants.

Despite the single-digit food inflation, the prices of individual products have significantly increased. The onion prices increased 51%, pulse gram 50%, besan 43%, gram whole 31.6%, fresh fruits 28% and cigarettes became expensive by 18.2%.

Similarly, prices for text books soared 40%, household servants 35% and doctors’ clinic fees increased by 25.53%.

The PBS’s average commodity prices did not reflect the actual prices of the commodities. The prices of fresh fruits and onions have increased in the range of 50% to 150%, according to vendors.

Published in The Express Tribune, August 2nd, 2012.


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