Core inflation up 9.5pc in March
ISLAMABAD, April 21: Core inflation non-food and non-energy ballooned to 9.5 per cent in March, the highest in the past couple of years as against 5.3 per cent last year, finance ministry said on Monday.
This increase in the core inflation since February 2006 from 5.7 per cent was on account of rising house rent and medicare sub-indices despite tight monetary policy of the State Bank of Pakistan during the period under review.
The core inflation also increased in the first nine months (July-March) of the current fiscal year (6.5 per cent), compared with the corresponding period of last year (5.8pc).
Analysts said that the persistent increase in the house rent and health-care are creating serious threats, intensifying housing and health problems.
The non-food inflation is also ascending upward as second round of food inflation is building pressure on non-food inflation.
In March 2008, non-food inflation spiked to 9.4 per cent as against 5.5 per cent of last year on the back of a two-time increase in the domestic petroleum prices.
The non-food inflation would easily cross the double digit mark due to recent third time increase in the local petroleum price.
For July-March 2008, the non-food inflation remained more or less at last year’s level of 6.3pc.
A report of the finance ministry showed the overall CPI-based inflation registered an increase in March 2008 as compared with previous month (February 2008) on year-on-year basis.
The headline inflation was 14.1 per cent in March 2008 as against 11.2 per cent in February 2008 and 7.6 per cent in the corresponding month of last year (March 2007).
The increase in headline inflation in March 2008 as compared with last month is attributable to a global rise in food inflation which moved upward to 20.6 per cent from 16 per cent in February 2008 and 10.7 per cent in the corresponding month of last year (March 2007).
It is a well-known fact that food inflation has emerged as a major source of concern for policy-makers around the world, including Pakistan. The global food price index is up by 54.1 per cent.
Food inflation in Pakistan has been fuelled by a combination of domestic demand driven factors (rising per capita income), local supply shortage and global trends in prices of several commodities.
Higher prices of edible oil (palm oil and soybean) and dependency on their imports transmitted higher international prices to domestic prices.
The new government’s decisions on prices and availability of essential food items are expected to bring inflation within a tolerable range.
Pakistan has witnessed sharp increase in wheat and flour prices (despite bumper wheat crop of 23.3 million tons), totally driven by “extra-market forces.”
Seven essential food items (wheat and flour; rice, pulses, meat, milk, ghee / cooking oil, and vegetables), accounting for almost 70 per cent of total weight of food group, are responsible for a sharp increase in food inflation in Pakistan.
Like last year, this year’s inflation is also fuelled by food inflation.
During the first nine months (July- March) of the FY08, the average CPI-based inflation stood at 9.5 per cent as compared to eight per cent last year.
Food inflation increased to 13.8 per cent in the first nine months of the current fiscal year as against 10.3 per cent in the same period last year.