Inflation in April swells to highest in two years

• Food and energy costs found to be main contributors to hike in inflation.
• Inflation remains in double digits for six consecutive months.
• CPI stood at 14.6% in January 2020, it was even higher and , reaching a two-year high.

ISLAMABAD: As measured by the Consumer Price Index (CPI), inflation hit a two-year high of 13.37% in April 2022, which was only 1.6% higher than the previous month in the same month last year, The News reported citing Pakistan Bureau of Statistics (PBS).

The analysis shows food and energy costs as the main contributors to the hike in inflation. It is noteworthy that the inflation has remained in double digits for six consecutive months.

The last time the inflation rate was this high was eleven years back, in June 2011 when the CPI was recorded at 13.3%. However, in January 2020, it was even higher and stood at 14.6%.

With inflation reaching a two-year high, the ten-month average inflation rate (July-April 2021-22) rose to 11.04%, exceeding the State Bank of Pakistan's anticipated upper limit for inflation. The central bank projected that CPI to be 9-11% by the end of this fiscal year.

Similarly, the International Monetary Fund (IMF) warned Pakistan in its most recent World Economic Outlook that rising inflation and the external environment had increased near-term risks. The fund sharply revised its previous projections, predicting that Pakistan's current account deficit (CAD) would reach $18.5 billion and average inflation would be 12.7% by this fiscal year.

Rising food prices, according to economists, were the primary driver, followed by vehicle fuels and electricity charges. They claimed that the recent acceleration in inflation was due to supply chain disruptions, high transportation charges, and surging global commodity prices. “Imported inflation (high energy and commodity prices) also plays a role in driving up economic prices,” an economist explained.

Inflation is viewed as an 'unseen tax' or penalty on cash holders, eroding purchasing power, and has become a politically sensitive topic. The ten-month inflation (July-April) was 11.04%, compared to 8.62% in the same period last year.

The Consumer Price Index (CPI) is a basket of goods that tracks retail prices of 374 items in 35 major cities. Its two major components with the highest weightage, food and beverages with a share of more than one-third (or 34.58%), and utility charges (housing, water, electricity, and fuel) with around one-fourth (or 23.63pc share) become significantly more expensive during April. Clothing & footwear and transportation charges also increased sharply. It is to be noted that inflation has been an increasing trend for the last several months that has primarily affected the lower middle class. But the government is attributing the high inflation to increased commodity prices, including food and crude in the international market, while the supply-chain disruption also created shortages. Currently, Pakistan is a net importer of wheat, pulses, sugar, edible oil, and other food items.

According to the statistics office, CPI in April 2021 was at 11.1%, and now it arrived at 13.37%. In March 2022, the CPI was at 12.72%.

According to PBS, urban inflation increased by 12.2% yearly in April 2022 compared to 11.9% in the previous month and 11% in April 2021.

Similarly, rural CPI inflation increased by 15.1% on a year-on-year basis in April 2022 compared to an increase of 13.9% in the previous month and 11.3% in April 2021. Over the last month, urban and rural inflation both increased 1.6%. Urban core CPI (excluding the food and energy components) increased by 9.1% year-on-year in April 2022 against 8.9% in the previous month and 7% a year ago. And it rose 1.1% over the last month.

Likewise, rural core-CPI increased 10.9% Y-on-Y in April 2022 compared to 10.3% in the last month and 7.7% in April 2021. On-month-on-month basis, it increased by 1.2% in April over the previous month.

The Wholesale Price Index (WPI) showed a 28.1% increase in April compared to 23.8% a month earlier and only 16.6% in April 2021. WPI inflation on a month-on-month basis increased by 3.2% during April. The sharp increase in WPI indicates that the CPI inflation in the coming months can go further high, as the WPI always has a lag effect on the retail prices.

The Sensitive Price Indicator (SPI) also increased 14.2% in April 2022 compared to 13% last month and 21.3% in the same month of the previous year. It also increased by 1.5% in April over the last month.

According to the PBS, during the month, food and beverage prices increased by 17.04% from 15.3% in the previous month.

In the food group, in one month, the chicken price increased by 33.6%, fruit by 15.2%, mustard oil by 8.7%, vegetable ghee by 8.3%, onions by 7%, cooking oil by 5%, gram whole by 2.1%, tea 1.9%, milk 1.5% and besan by 1% over the previous month. However, tomatoes prices fell 36.5%, eggs 14.7%, wheat 4.9%, potatoes 3.7%, condiments and spices 2.4%, gur 1.1%, wheat flour, and sugar prices down by 1% each.

Year on year, tomatoes price up 149%, mustard oil 60%, vegetable ghee 50%, cooking oil 48%, masoor pulse 38%, vegetables 35%, fruits 32%, the whole gram 25%, meat 24%, chicken 20%, and besan 14%.

However, moong pulse prices are down 27%, eggs 20%, condiments and spices 15%, sugar 10.7%, and potatoes 9.5%.

Utility charges (housing, water, electricity, and fuel) increased by 7.05% in April 2022. On a month-on-month basis, liquified hydrocarbon price was up 7.8%, woolen cloth 3.14%, furniture & furnishing 2.5%, construction input items 2%, stationery 1.8%, motor vehicles 1.76%, cotton cloth 1.42%, motor vehicle accessories 1.4% and washing soap/detergents/matchbox became dearer by 1% over the previous month.

Year-on-year, liquefied hydrocarbons price up 79%, motor fuel 37%, cleaning & laundering 24%, washing soap/detergents/matchbox 17%, motor vehicle accessories 16%, solid fuel price up 13% over the same month of last year.

The other components of the CPI also showed an increase in their prices. The transport sector, although having a low share in the CPI basket, its charges increased the highest with 28.34%, furnishing, and household equipment maintenance at 14.66%, hoteling at 14.57%, clothing, and footwear at 10.84%, health charges at 10.37%, recreation and culture 9.65%. Similarly, education charges up 8.36% and communication charges 1.61% over the corresponding month of last year.