September 01, 2022 (MLN): Pakistan's yearly inflation rate (New Base 2015-16) in August 2022 jumped to 27.26% YoY- highest since 1975 compared to 24.9% YoY in July 2022 and 8.4% YoY in August 2021, according to the latest data released by Pakistan Bureau of Statistics (PBS) today.
High tides of inflation have brought the 2MFY23 average CPI number to 26.08% YoY as against 8.4% YoY in the corresponding period last year.
August’s reading was in line with the market expectations which were between 25.78% YoY and 27.6% YoY with an average estimate of 26.74% YoY.
On a month-on-month basis, it rose by 2.4% MoM in August 2022 as compared to an increase of 4.35% MoM in the previous month and an increase of 0.6% MoM in August 2021.
This sequential increase was driven by the housing, clothing & footwear, and food index by 5.45% MoM, 2.8% MoM, and 1.30% MoM.
The housing index with the weightage in CPI of 23.63% contributed most owing to an increase in electricity charges while the food index moved up on the back of a notable hike in the prices of perishable food items (3.30% MoM).
Within the food basket, the prices of tomatoes, pulses, chicken, and fruits surged by 53% MoM, 15% MoM, 11.5% MoM, and 20% MoM, respectively.
The surge in food items is primarily due to the supply chain disruption as historic monsoon floods put a back-breaking impact on the agricultural sector of Pakistan.
On the other hand, the transportation index witnessed a decline of 0.3% MoM due to a reduction in petroleum products prices in August.
Geographically, the inflation in urban areas has jumped to 26.2% YoY in August 2022 as compared to a surge of 23.6% in the previous month and 8.3% in August 2021. On a month-on-month basis, it went up by 2.6% MoM, compared to an increase of 4.5% in the previous month and an increase of 0.5% in the same month last year.
Likewise, the prices in rural areas have also witnessed an upward trajectory, up by 28.8% YoY and 2.2% MoM in August 2022.
At the same time, core inflation- measured by Non-Food Non-Energy (NFNE) in cities climbed up by 13.8% YoY in August 2022 as compared to an increase of 12% in the previous month and 6.3% in August 2021.
Similarly, the core inflation in rural areas observe an increase of 16.5% YoY % within the review period, compared to the reported jump of 14.6% in the previous month, and an upsurge of 6.2% in the corresponding month of last year.
The Wholesale Price Index (WPI) for August 2022 increased by 41.2% YoY in August 2022. It has jumped by 17.1% over the corresponding month of the last year i.e. August 2021. The surging gap between CPI and WPI created an alarming situation which indicates that cost-push inflation will likely hit the remaining months of FY23.
In an attempt to reign out the inflationary pressure and cool the overheating economy, the State Bank of Pakistan (SBP) has raised the policy rate by a cumulative 800 basis points since last September. Accordingly, the real interest rate is still hovering in the negative territory at around 12%.
To note, in the recent MPC meeting, the central bank kept the policy rate unchanged at 15%, expecting the measures to work their way through the system over the coming months.
Outlook:
An expected spike in food inflation amid recent record floods, hikes in fuel and energy prices and lagged effects of recent Rupee depreciation would keep pushing the CPI numbers to increase.
Thus, no respite in soaring inflation numbers is expected as the situation keeps on worsening and the lag impact will be more devastating.
On the other hand, SBP in its recent MPC statement said that headline inflation is projected to peak in the first quarter before declining gradually through the rest of the fiscal year.
Thereafter, it is expected to decline sharply and fall to the 5%-7% percent target range by the end of FY24 which seems quite unrealistic in the present circumstances.
Copyright Mettis Link News
Posted on:2022-09-01T11:48:04+05:00
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