Inflationary pressures easing: Food inflation starts to decline

ISLAMABAD: With the announcement of SPI on Friday and CPI data on Monday, May 31, 2021, the inflation scenario has significantly improved. The CPI, during the month of May, came to 10.9pc compared to 11.2pc a month earlier, which is a clear sign of easing in inflationary pressures.

According to the statement issued by the Ministry of Finance on Wednesday, this assertion is strengthened by two further developments. One, the month-on-month inflation dropped to only 0.1pc compared to 1pc in April. Two, the average inflation for 11 months (July-May) has come down to 8.8pc compared to double-digit inflation on 10.9pc.

It is also important to underline that food inflation has also started to decline. In urban areas, month-on-month food inflation come down from 2.7pc in April to 1.1pc in May. Similarly, in rural areas, food inflation dropped from average of 14.1pc in April to 12.8pc in May. Similar, trends are also witnessed in core-inflation. Both in rural and urban areas, year-on-year core-inflation declined from 7pc to 6.8pc and from 7.7pc to 7.6pc respectively. Going forward, we expect inflationary pressure to further abate in view of good crops, improved supply conditions, and vigilant monitoring of price movements in the markets. The SPI inflation has also declined by 0.63pc compared to a week earlier. Similarly, the year-on-year SPI inflation has also come down from 17.23pc to 16.34pc. As per the data, prices of 10 items decreased in the week compared to the last week, while 29 remained stable, and for 12 commodities witnessed an increase. Prices of essential commodities such as tomatoes, potatoes, ghee, etc. have either witnessed decrease for the past six weeks or have remained stable. However, the most notable reduction is seen in the prices of chicken and eggs.

The factors that had contributed to recent increase in the SPI have all uniformly shown a declining trend. All these developments reflect the result of regular monitoring of markets and close coordination with provincial authorities. In particular, steps were taken to counter the effects of cartelisation by the Competition Commission of Pakistan and strict action by provincial governments against hoarding and profiteering. Because of these efforts, the chicken prices, which had risen as high as Rs500/kg in certain places, have come down to moderate levels, though there is still room for further reduction.