Inflation eases at 3.9pc, signals weak economy

ISLAMABAD: Annual consumer inflation hovered at a record low of 3.88 percent in January, signaling some weakness in the economy but also giving policymakers more room to ease policy to support much-needed growth.
The Pakistan Bureau of Statistics (PBS) data on Monday showed the consumer price index (CPI) inflation was recorded at 4.3 percent in December 2014.
Average inflation in first seven months (July-January) of the ongoing fiscal year remained at 5.8 percent over the corresponding period last year.
During last three months, CPI inflation has been hovering around four percent. It was 3.9 percent in November last year.
Independent economists fear the rising risk of deflation as the economy is expected to slow further in the next few quarters, which is a significant risk, and requires policymakers to monitor the situation closely and take action swiftly.
They said naturally inflation in Pakistan should be between five and six percent.
In January 2015, prices of food and non-alcoholic beverages were up by 2.13 percent and utilities (housing, water, electricity, gas and fuel) by 5.74 percent. Health and education charges became dearer by 6.07 percent and 14.2 percent, respectively. Prices of alcoholic beverages and tobacco stood at 20.21 percent, clothing and footwear 8.09 percent and furnishings and household equipment maintenance 6.42 percent. Charges related to recreation and culture went up 3.43 percent and restaurants and hotel 5.97 percent in January 2015 over the same month in 2014. However, transportation charges were down by 2.13 percent because of the declining petroleum prices.
The PBS data showed that the sensitive price indicator, which gauges weekly inflation in kitchen items, increased by 3.14 percent in July-January 2014-2015 over the same period 2013-14.
Similarly, the wholesale price index-based inflation rose by 1.48 percent in the period under review.
Price of tomatoes increased by 7.3 percent in the month of January 2014 against December, price of chicken by five percent and pulse gram went up by 3.96 percent. Similarly, in non-food commodities, price of firewood whole increased three percent, house rent two percent and medical test 1.8 percent.
Items, prices of which decreased, included potatoes (25.37 percent), cooking oil (2.27 percent), besan (2.17 percent), rice (1.9 percent) and sugar (1.53 percent). Prices of motor fuel dropped 4.01 percent, kerosene oil 7.03 percent and transport services 1.53 percent during January over December.
Historically, inflation rate in Pakistan averaged 8.01 percent from 1957 until 2015, reaching an all time high of 37.81 percent in December of 1973 and a record low of negative 10.32 percent in February of 1959.