Pakistan Inflation at Lowest Level in two Years

Pakistan Inflation at Lowest Level in two Years

Inflation in Pakistan was recorded at 5.7% in January, which is the lowest in two years, according to the IM Securities.

It was 14.6% in January 2020 and 8% in December 2020.

The urban consumer price index (CPI) or inflation fell to 5.0% in January from 7% in December. The rural inflation dropped to 6.6% in January from 9.5% in December.

“Urban and rural food inflation of 7.3% and 7.2% in January respectively, is at the lowest level they have been since July 2019,” the IM Securities said in a research report. “This was possible because the government addressed recent supply issues in wheat and sugar through imports and major perishable items are down 20% year on year.”

But the report said this may be a short-term effect as prices have been stabilized due to imports. Food items were still exhibiting double-digit year-on-year growth rates. The research house believes food inflation can rebound in the coming months.

Deceleration in the inflation rate was largely due to a low-base effect of January 2020 when inflation was at 14.6%, it said.

“The deceleration in CPI (inflation) is largely due to a low-base effect of January 2020 (CPI of 14.6%) and receding food inflation, which has decreased to 2.2% month on month,” the report said.

“Core inflation, however, exhibited greater stability. Urban core inflation is 5.4% in January against 5.6% in December. Rural core inflation, on the other hand, rose to 7.8% against 7.7% in the previous month.

“It is noteworthy that core inflation has remained steady around since July 2020, despite 7% year on year increase in large scale manufacturing during July-November period,” the report read further.

“There are no signs of the economy overheating, as stated by the State Bank in the recent monetary policy [announcement].”

The food items, whose prices increased in urban areas during the month, were sugar (14.76%), mustard oil (10.18%), wheat (8.17%), vegetable ghee (6.06%), fruits (5.39%), cooking oil (3.28%), milk fresh (2.46%), pulse moong (2.02%) and fish (1.64%).

Food items, whose prices decreased, included potatoes (33.57%), tomatoes (30.03%), chicken (28.48%), onions (24.87%), eggs (15.39%), vegetables (10.14%) and condiments and spices (7.54%).

In rural areas, the price of sugar rose 14.26%, mustard oil 7%, cooking oil 6.22%, wheat 5.88%, vegetable ghee 5.62%, wheat flour 4.21%, fruit 3.75%, butter 2.93%, pulse moong 2.74%, grain whole 2.31% and pulse mash 1.85%.

The price of potato decreased 36.1%, tomatoes 32.77%, chicken 26.47%, onions 25.99%, vegetables 13.32%, eggs 9.27%, condiments and spices 7.96% and pulse masoor 0.42%.