KARACHI: Inflation hit its highest level in more than a decade to 21.32 percent year-on-year in June, pushed higher by raise in petroleum products prices.
The monthly rise in the consumer price index (CPI), published by the Pakistan Bureau of Statistics (PBS) on Friday, was significantly higher at 21.32 percent YoY in June and above analysts’ expectations of 18-20 percent rise. In May, CPI went up 13.8 percent, whereas it increased 9.7 percent in June 2021.
On month-on-month basis, June 2022 CPI increased 6.34 percent compared to 0.4 percent in May last month. This brought the annual rate of inflation up to 12.15 percent in FY22, which is the highest after FY11 when inflation clocked in at 13.7 percent.
“This sharp surge in inflation, especially in the transport segment, was driven by successive increase in fuel prices by the government,” analyst Umair Naseer at Topline Societies said. “Food inflation also continued to rise as it increased by 5 percent MoM in June against only 1 percent in May 2022.”
Transport, which holds 5.91 percent weightage in CPI, showed an increase of 24.39 percent in June. The coalition government, since coming to power in April, has raised the price of petrol by almost Rs99. It had first raised the petrol price by Rs30 on May 26, followed by another increase of Rs30 on June 2. And on June 15, it hiked the price by another by Rs24. On July 1, it increased the petrol price by Rs14.85 per liter.
Analysts said monthly increase in inflation would likely remain elevated on account of higher energy costs, with petrol prices now standing at Rs248.74/litre, along with a steady rise in transport, energy and other related costs.
Elevated inflation has become one of the toughest challenges faced by Prime Minister Shehbaz Sharif’s coalition government, which came to power following a vote of no confidence against former premier Imran Khan, who was accused of economic mismanagement by the opposition.
Soaring prices of commodities and stagnant wages have been taking a huge toll on Pakistani households, particularly those from the lower and middle income segments. High inflation is eroding purchasing power of common Pakistanis, adding to political risk for fragile collation government.
Naseer said the sharp rise in commodity prices and supply bottlenecks is exerting pressure on inflation numbers, especially for countries that are net importers of oil. “We expect inflation to remain elevated during the next 4-6 months with average inflation for FY23 likely to remain in range of 17-19 percent.”
Analyst Naseer also expects a policy rate hike by the central bank in a meeting scheduled for next week. The State of Bank of Pakistan has already raised the policy rates thus far by 400 basis points in 2022.
Prices of the top few food items which increased as compared to May 2022 were potatoes (34.64 percent), eggs (19.98 percent), pulse masoor (17.42 percent), mustard oil (17.39 percent), pulse gram (14.03 percent), gram whole (13.62 percent), wheat (13.03 percent), vegetable ghee (12.86 percent), rice (11.67 percent), besan (9.36 percent), tomatoes (9.03 percent), milk (8.18 percent), cooking oil (7.91 percent), and fruits (7.69 percent).
Non-food items that recorded a price surge were electricity charges (51.8 percent), motor fuel (37.13 percent), footwear (8.82 percent), stationery (8.29 percent), construction input items (5.26 percent), motor vehicle accessories (4.4 percent), plastic products (3.87 percent), washing soap/detergents/match box (3.80 percent) and carpets (3.03%).
The CPI on new base (2015-16) comprises urban CPI and rural CPI. Urban CPI covers 35 cities and 356 consumer items, whereas rural CPI covers 27 rural centers and 244 consumer items.
CPI inflation urban increased by 19.8 percent on YoY basis in June 2022 as compared to an increase of 12.4 percent in the previous month and 9.6 percent in June 2021. On MoM basis, it increased by 6.2 percent in June 2022 as compared to an increase of 0.3 percent in the previous month and decrease of 0.4 percent in June 2021.
CPI inflation rural increased by 23.6 percent on YoY basis in June 2022 as compared to an increase of 15.9 percent in the previous month and 9.7 percent in June 2021. On MoM basis, it increased by 6.6 percent in June 2022 as compared to an increase of 0.6 percent in the previous month and decrease of 0.1 percent in June 2021.
Sensitive price indicator (SPI) inflation increased by 21.7 percent YoY in June 2022 as compared to an increase of 14.1 percent a month ago, and 17.6 percent in June 2021. On MoM basis, it increased 6.2 percent in June 2022 as compared to an increase of 0.6 percent a month earlier and decrease of 0.4 percent in June 2021.
Wholesale price index (WPI) inflation on YoY basis increased by 38.9 percent in June 2022 as compared to an increase of 29.6 percent in May and 20.9 percent in June 2021. On MoM basis, WPI increased 8.2 percent in the month under review, compared to 1.4 percent last month and 0.9 percent in June 2021.