Sustaining the slide: Inflation falls to 32-month low against the odds

CPI for August stands at 9.1%, beating expectations of trend reversal.

ISLAMABAD: Inflation dipped to 32-month low of 9.1% and remained in single-digits for the second consecutive month in August, beating expectations of an increase in trend due to abnormal increase in food prices in Ramazan and surge in petroleum prices.

The Pakistan Bureau of Statistics (PBS) released the official figures even before the end of the month. Usually, it announces the inflation data in the first week of the new month.

On back of the single-digit inflation of 9.6% in July and seeing the trend to continue, the State Bank of Pakistan has already cut its benchmark discount rates, reducing the borrowing costs for both the government and the private sector.

The inflation rate in the second 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.

Due to single-digit monthly inflation, the average inflation for the two months also remained in single-digits. According to the PBS, the average inflation between July and August was recorded at 9.32%.

While the general inflation is down, the non-food and non-energy inflation, known as core inflation still remains a concern. The core inflation, even a more significant measure to check inflationary trends, remained in the double-digits and was recorded at 10.8% in August over a year ago, 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.

Similarly, the prices of individual products increased significantly. The price of tomatoes soared 78.6%, onions 46.3%, pulse gram 46.2%, besan (gram flour) 43%, gram whole 24%, fresh fruits 18% and cigarettes became expensive by 18.2%.

However, contrary to the official rates, the prices of vegetables and fruits almost doubled last month due to increase in demand in the holy month of Ramazan.

The text books prices soared 40.5%, household servants 28.7%, motor vehicles tax 27% and doctors’ clinic fees increased 25%.

Published in The Express Tribune, September 1^st, 2012.