Surprising statistics: Inflation falls to 7% in August

Published: September 2, 2014
Email
Stark contrast: 113.8% is the increase in price of potatoes in August 2014, compared to the corresponding period in 2013 300,000 tons of potatoes have been approved by the government for duty-free import. CREATIVE COMMONS

Stark contrast: 113.8% is the increase in price of potatoes in August 2014, compared to the corresponding period in 2013 300,000 tons of potatoes have been approved by the government for duty-free import. CREATIVE COMMONS

ISLAMABAD: 

The rapid increase in prices of essential commodities has slowed down to what they were in the post-election period, as inflation fell to 7% on a year-on-year (YoY) basis in August, increasing prospects of a reduced discount rate in the upcoming monetary policy announcement.

Inflation measured by the Consumer Price Index (CPI) – an indicator that captures prices of 481 commodities every month – rose to 6.99% in August on a YoY basis, according to the Pakistan Bureau of Statistics (PBS) on Monday. It was the lowest since July last year.

In June 2013, when the PML-N government came into power, the CPI-based inflation had been recorded at 5.9% – jumping to 8.3% within one month. Since then it remained above the 7.5% mark.

The latest reduction has taken the analysts by surprise as they were expecting inflation to clock in at 8.2%.  The downward slide was recorded both in the prices of food and non-food items, according to the PBS data. The food inflation slipped to 5.6% while non-food inflation decreased to 8.1%.

In July this year, the overall index rose to 7.9% on a year-on-year basis and there was an almost one percentage point reduction in a single month that highlighted prospects of reduction in the key discount rate. The State Bank of Pakistan (SBP) is expected to announce monetary policy for next two months. In the last monetary policy announcement, the board of the SBP had kept the discount rate unchanged at 10%.

However, according to analysts, SBP may retain the discount rate in a bid to use the monetary policy as a tool to build foreign currency reserves after the recent slide in the level of reserves.

According to the PBS, the rate of increase in prices of perishable food items slowed down to 6.2% year-on-year in August. The prices of non-perishable food items also slowed down to 4.7% last month. Clothing and footwear prices remained at 9.2%.

The highest increase was in the category of alcoholic beverages and tobacco groups as the prices soared by 22.6%.

In food, the price of potatoes increased by 113.8% in August in comparison to the corresponding period of previous year, suggesting measures to curtail the rates were unsuccessful. The federal government has allowed duty-free import of 300,000 metric tons of potato to check the prices in the domestic market. Pulse moong rates increased about 21.5% and there was a 22.8% increase in prices of cigarettes due to increase in taxes from July this year.

The fuel- and food-adjusted inflation also slowed down to 7.8% year-on-year in August, a reduction of 0.4% in a single month. The slowdown in the pace suggests that the inherent risks of double-digit inflation are abating. Independent experts give more importance to core inflation, excluding food and energy, which are susceptible to seasonal price shocks.

The average inflation during the first two months (July-August) of the fiscal year remained at 7.44% as compared to the same period of the previous fiscal.

For the new fiscal year, the government has set the inflation target at 8% as any significant curtailment is not possible due to rationalisation of subsidies, monetary overhang and rising demand, according to the Annual Plan for 2014-15.

Published in The Express Tribune, September 2nd, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

Facebook Conversations

Reader Comments (31)

  • Ch. Allah Daad
    Sep 2, 2014 - 6:54AM

    If economy can improve in these circumstance then imagine that how much PML(N) government can achieve in normal circumstances.Recommend

  • Frank
    Sep 2, 2014 - 7:42AM

    I can see an accountant’s hand behind these statistics…Recommend

  • bahaha
    Sep 2, 2014 - 9:05AM

    definition of inflation: The cost of keeping US dollar as global currency.

    Recommend

  • poor shahbaz rana
    Sep 2, 2014 - 10:19AM

    Poor Shahbaz Rana is not only surprised but also disappointed at this stats. Your anti-gov agenda has sure taken a hit I guess

    Recommend

  • A J Khan
    Sep 2, 2014 - 10:37AM

    Fake statics based on fake data spinned by fake experts.

    Recommend

  • Proletarian
    Sep 2, 2014 - 10:46AM

    Probably global effect of decreasing sanctions on Iran.

    Recommend

  • Rational
    Sep 2, 2014 - 10:58AM

    A dip in inflation is always observed in the month of Shawal

    Recommend

  • incognito59
    Sep 2, 2014 - 11:37AM

    Concocted data! Some one is known for it.

    Recommend

  • Mamu
    Sep 2, 2014 - 11:37AM

    Maybe this time also Ishaq Dar will say that it was a Typo error.
    The inflation is actually 17% not 7%.

    GO NAWAZ GO.

    Recommend

  • Ali-Dubai
    Sep 2, 2014 - 11:44AM

    @Ch. Allah Daad:
    Please tell me how many Mega Watt inducted into national Grid? Nandipur? because these stats are not authenticated.
    Your leaders, America, India wants to destroy our Army only.
    There is no day left where we not saw any controversy against Army initiated by Govt.

    Recommend

  • enayat ullah
    Sep 2, 2014 - 11:51AM

    shaukat aziz told same stories against realities…

    Recommend

  • naeemhussain
    Sep 2, 2014 - 12:03PM

    Another blunt lie of the government.

    Recommend

  • Parvez
    Sep 2, 2014 - 12:03PM

    One mor lie…….makes no difference.

    Recommend

  • Faraz
    Sep 2, 2014 - 12:04PM

    I am amazed how N-league supporters now consider these official statistics as the holy truth, but were the first ones to dis-credit the positive statistics which were produced by the very same institutions during Musharraf’s era.

    Recommend

  • Bob
    Sep 2, 2014 - 12:20PM

    Bravo Ishaq Dar! You have done it again.

    I can see cool breeze blowing, rivers of milk and honey running. I no more need to go to paradise, I have found one in Pakistan.
    My generations will be indebted to Nawaz Sheiref. You single handedly have eliminated load shedding, foreign and domestic debt is Alhamdulillah no more. So many jobs are there I am yet to decide which company to join.

    Thanks & LONG LIVE THE KING.

    Recommend

  • Mango man
    Sep 2, 2014 - 12:21PM

    @Mamu: You sound like a mamu, by its literal definition.

    Recommend

  • nkhan
    Sep 2, 2014 - 12:47PM

    Reason is quite simple “inflationary Gullu Butt” are quite busy in order to coupe up with the revolution :)…..

    Recommend

  • Pea Brain
    Sep 2, 2014 - 12:50PM

    @Ch. Allah Daad:
    Sahb, I wonder, you are either inbetween jobs or super rich to not need one. Man, you are always on every post. Free much?

    Recommend

  • Sameer
    Sep 2, 2014 - 12:52PM

    @Ch. Allah Daad: Did you ever consider that the economy is improving. because both the parliament and the current government are pre occupied, in other words “in absence of there meddling”? i am not saying you are wrong but what did “PML(N) government” do exactly to achieve this?

    Recommend

  • Ahmed
    Sep 2, 2014 - 1:03PM

    Call the govt incompetent or whatever you want, but dont say it jusy becaise imran khan says so. Pmln have the better economic policy as compared to ppp/ pti. Overall betterment of economy has little trickle down effect on the populace but it’s good for the industry and new investment which does indirectly benefit the lower and middle class.

    Recommend

  • Ahmed
    Sep 2, 2014 - 1:05PM

    Its doesn’t make any sense of #Go nawaz Go on each and every news article. Pti people atleast comment that where it makes sense. No offence.Recommend

  • Citizen26
    Sep 2, 2014 - 1:30PM

    Govt had last year announced incorrect budget figures and had also quoted incorrect economic statistics. And our Election commission cannot even do a proper vote count.
    Based on our history, we need to wait what IMF and World Bank sees our inflation rate as.

    Recommend

  • BOZO
    Sep 2, 2014 - 1:56PM

    I have been repairing calculators for more than 20 years. I request the government to get their calculator checked, My checking charges are one sack of potatoes.

    Recommend

  • Sami
    Sep 2, 2014 - 7:48PM

    It is Typo.

    Recommend

  • Oats
    Sep 2, 2014 - 9:44PM

    @Ali-Dubai: You saw 10 years of Musharraf rule without 1 MW of electricity added to the national energy grid but you expect PML N to fix everything in hardly a year? They have inked deals with the Chinese to build nuclear reactors in Karachi as well as set up power plants throughout the country. More will be done in the following three years than was done in the past 15 years but it seems that the enemies of Pakistan are threatened by these important infrastructure projects. Lahore Karachi Motorway, Gwader, rail links and energy projects are all game changers for Pakistan but just as these projects are set to take off, Imran Khan and Tahirul Qadri are pushed to destabilize things. I wonder who is behind them to do this now?

    Recommend

  • rs
    Sep 2, 2014 - 11:03PM

    Inflation probably fell because of the effect of rupee appreciation in previous months. There tends to be a bit of lag until exchange rate changes are reflected in the general level of prices. Now with the recent rupee depreciation we should see inflation shoot up 2-3 months from now.

    Recommend

  • Pea Brain
    Sep 3, 2014 - 2:37AM

    @ Ch. Allah Dad:
    Sahb (or do you prefer Sahab?), so does your excellency believe that when we get to those normal circumstances the Messiah Supreme a la PML(N) His Holiness The Sharif (II) will be able to cure HIV?

    Recommend

  • Faraz
    Sep 4, 2014 - 12:46AM

    @ Oats: To have an educated discussion, one needs to have facts to back claims. Here bellow, I paste a link to the US Energy Administration website, where you can see electricity related statistics for almost any country of the world.

    http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=2&pid=2&aid=12&cid=PK,&syid=1999&eyid=2008&unit=BKWH

    Incase you are too busy to go through it, I can summarize a few facts for you regarding Pakistan between 1999-2008:

    Installed electricity capacity in
    1999: 17.387 Million KW
    2007: 19.755 Million KW

    Electricity Generation:
    1999: 62.492 Billion KWh
    2008: 87.736 Billion KWh

    If you want to know the difference between million kilo watt, and billion kilo watt hours, you would have to refer to their website, technical terms.
    So,after reading this, we can conclude not 1 MW of electricity was added to the national grid in 10 years of Musharraf rule.

    Recommend

  • oBSERVER
    Sep 21, 2014 - 3:00PM

    @Bob: the king is dead long live the king.

    Recommend

  • oBSERVER
    Sep 21, 2014 - 3:02PM

    @Pea Brain: he is assistant to the assistant PA to Ishaq Dar.

    Recommend

  • oBSERVER
    Sep 21, 2014 - 3:05PM

    Positive outcome of Dharnas. Her aik apna Qibla darust ker raha hay.

    Recommend

More in Business