Inflation Rate Of Pakistan

Inflation Rate of Pakistan In sheer contrast to significant abatement in the inflationary pressures across the globe, the inflation in Pakistan has depicted downward rigidity. All price indices like CPI, WPI and SPI witnessed a clear downtrend in recent months. The inflation rate as measured by the changes in Consumer Price Index (CPI) after reaching peak at 25.3 percent in August 2008, showing easing since November 2008 but bounced back to 21.1 percent in February 2009 mainly because of spike in the prices of some food items like onion, chicken farm, sugar etc. WPI inflation is following international declining trend but non-food component of the CPI showed some stubbornness till February 2009. The CPI inflation averaged 23.5 percent in July-February 200809 as against 8.9 percent in the comparable period of last year [See Table]. Table-4:

July August September October November December January February

Inflation Situation in Pakistan (%) Core CPI WPI SPI Inflation 24.3 34.0 33.0 14.7 25.3 35.7 33.9 16.4 23.9 33.2 31.1 17.3 25.0 28.4 32.7 18.3 24.7 19.9 29.8 18.9 23.3 17.6 25.8 18.8 20.5 15.7 20.8 18.91 21.1 15.0 23.4 18.85

The food inflation is estimated at 28.9 percent in July-February 2008-09 as against 13.0 percent in the comparable period of last year. The relative slowdown in domestic inflation since September 2008 is mainly driven by the deceleration in food inflation whereas non-food component has generally remained stubborn. Notwithstanding recent downward trajectory, the food inflation is still quite high and is attributable to stubbornness of prices of edible oil, pulses, rice, milk, sugar, poultry, meat, wheat, wheat flour, fresh vegetables and fruits. The non-food inflation stood at 19.3 percent, against 5.9 percent in the corresponding period of last year. The non-food inflation is also high because of hike in transport group, fuel and lighting group and house rent index. The downward adjustment of petroleum prices in the month of November is neutralized by frequent hikes in electricity and gas prices. On current trends and barring any adverse shocks, it is expected that the average inflation for the year (2008-09) as measured by CPI will be close to 20 percent. The core inflation which represents the rate of increase in cost of goods and services excluding food and energy prices also went up from 5.7 percent to 17.8 percent in this period. Notwithstanding, all demand compression, the core inflation resisted all downward pressures and remained sticky at around 18.9 percent for the last four consecutive months. Notwithstanding all monetary tightening during May 2007 to December 2008, the core inflation has also depicted first deceleration since May 2007 in December 2008 but hovered around 18.9 percent. The month of February witnessed fractional decline in the core inflation. The Wholesale Price Index (WPI) during first eight months of 2008-09 has increased by 24.7 percent, as against 11.7 percent in the comparable period of last year. It has declined from as high as 35.7 percent in August 2008 to 15.0 percent in February 2009, reflecting a marked downward correction in the last six months. This downturn is contributed by both food and non-

food components. The non-food component fell more steeply from 37.4 percent in August 2008 to 9.8 percent in February 2009. Food component has decelerated from 33.5 percent in August 2008 to 22.0 percent in February 2009. The Sensitive Price Indicator (SPI) has recorded an increase of 26.1 percent during this period (Jul-February 2008-09) as against 9.9 percent in the same period of last year. Going forward, the prices of edibles like sugar, wheat, meets, onions will be crucial in determining the fate of the SPI. Going forward, the prices of edibles like sugar, wheat, ghee/ cooking oil will be crucial in determining the fate of the SPI.