Inflation eases slightly to 10.9pc in May

Consumer inflation slightly eased to 10.9 per cent in May from 11.1pc in April, showed data released by the Pakistan Bureau of Statistics (PBS) on Tuesday.

According to the PBS, the inflation remained in double digits for the third month, though it fell to 5.7pc in January this year. It is mainly driven by double-digit growth in food inflation in both urban and rural areas.

On a month-on-month basis, inflation increased by 0.1pc mainly suggesting that pressure on prices is still there and no let-up will be seen in the coming month. Food as well as non-food items prices are still are on the higher side.

The average Consumer Price Index (CPI) in 11 months — between July and May — eased from 10.94pc last year to 8.83pc this year. It was projected that inflation will remain between 7pc to 9pc next year.

Food prices both in rural and urban areas witnessed double-digit growth

At the beginning of the current fiscal year, consumer inflation was recorded at 9.3pc in July, easing down to 8.2pc in August before rebounding to 9pc in September. From September, inflation went on a downward trajectory, giving some relief to the end consumers.

However, it rebounded in February. A few consumer items, as well as energy prices, pushed up inflation in March again, with the result that food inflation entered double digits in both urban and rural areas. There are food items prices of which are still on an upward trajectory.

Higher food prices pulled up inflation as prices of food group rose 15.3pc year-on-year basis and 1.1pc month-on-month basis in May in urban areas. The situation is almost the same in rural areas where prices of food group have risen to 12.8pc year-on-year basis and 0.2pc month-on-month basis in May.

The month-on-month increase indicates that prices of essential food items will see a further rise next month, as the weekly prices also show an upward movement that will drag monthly inflation.

The government has imported wheat and sugar to bridge shortfalls and improve supplies in the market. Between July and March, the government imported 3.612 m tonnes of wheat this year against zero import last year. No import of wheat was made in the month of April and May.

However, the Food Security Minister Fakhar Imam already announced that the government will import around four million tonnes of wheat to keep a buffer stock. The government estimates show a bumper wheat production this year at over 27m tones.

Similarly, the import of sugar stood at 280,377 tonnes during the 10 months of current fiscal year as against 5,866 tonnes over the corresponding period of last year, an increase of 4,679pc.

With the arrival of potatoes and onions in the domestic market due to good crops, their prices posted a decline during the previous month under review.

In urban areas, food items that saw a jump in prices in May from the previous month included chicken 16.87pc, fruits 10.54pc, wheat flour 9.75pc, mustard oil 5.15pc, meat 4.68pc, sugar 2.57pc, gur 1.99pc and rice 1.42pc.

The items whose prices declined in urban areas were tomatoes 46.64pc, vegetables 18.84pc, onions 13.15pc, eggs 11.58pc, pulse mash 1.37pc, pulse gram 1.33pc, pulse moong 1.27pc, wheat 1.16pc and pulse masoor 1.12pc.

In rural areas, chicken prices are higher by 22.56pc, potatoes 10.13pc, fruits 7.16pc, meat 5.92pc, gur 5.32pc, wheat flour 4.11pc, sugar 4.07pc, cooking oil 3.43pc, mustard oil 3.27pc, vegetable ghee 2.82pc and gram whole 1.69pc.

Non-food inflation

Non-food inflation in urban centres were recorded at 8.3pc year-on-year increase and 0.3pc month-on-month decline, whereas in rural areas it rose by 9.2pc and 0.3pc decline in month-on-month basis, respectively. The month-on-month fall in non-food inflation indicates a further decline in coming months as government did not pass on increase to end consumers.

The urban CPI covers 35 cities and 356 items, while the rural one tracks 27 centres and 244 products. The former grew by 10.8pc year-on-year in May whereas the latter jumped by 10.9pc.

Core inflation in urban areas was recorded at 6.8pc in May, compared to 7pc in the previous month. In rural areas, it was recorded at 7.6pc in May from 7.7pc in the previous month.

The State Bank of Pakistan determines the key policy rate, currently at 7pc, based on the core inflation rate. The central bank has reduced the rate by a cumulative 625 basis points since March 17, 2020 to combat uncertainty amid the coronavirus pandemic.

Contrary to this, the wholesale price inflation galloped to double digits in May as rising energy and commodity prices further aided by low-base effect.