Inflation jumps in Dec’22 despite finance ministry claims

ISLAMABAD: Inflation continued to soar in December 2022 proving the forecast of the finance ministry wrong which had been claiming that inflation was on a declining trend. The country registered a CPI inflation of 24.5% in December 2022 on a year-on-year (YoY) basis. This marked a 0.49% increase compared to the Consumer Price Index (CPI) registered in November 2022.

If there was a poll for public grievances in 2022, rising prices and inflation would be at the top of the list. The calendar year 2022 saw record inflation over the course of its 12 months and the last month of the year was no different. 

In a recently issued report, the finance ministry had claimed that the inflation rate would decrease and remain between 21 to 23% in the remaining month of the current fiscal year.  

According to the Statistical Office, urban inflation increased 21.6% yearly in December 2022 as compared to an increase of 21.6% in the previous month and only 12.7% in December 2021. The rural CPI increased 28.8% on a year-on-year basis in December 2022 as compared to an increase of 27.2% in the previous month and 11.6% in December 2021.

Source: Pakistan Bureau of Statistics

Core Inflation:

The core inflation (excluding the food and energy components) also increased over the previous month. Core inflation, as a rule of thumb, is a good indicator of the inflation caused by endogenous factors that have little to do with the international commodity prices.

Between 2010 to 2022, YoY core inflation averaged 7.6% with the highest reading of 14.9% in October 2022, and the lowest of 3.4% in Sept 2015. The core inflation rate for December was up by 14.7% as compared to December 2021.

According to the inflation bulletin, the urban core CPI increased by 14.7% on a YoY basis in December 2022 against an increase of 14.6% in the previous month and 8.3% in December 2021. Likewise, the rural core CPI increased 19% on a YoY basis in Dec 2022 as compared to 18.5% in the last month. On a month-on-month basis, urban core inflation is up by 1.2% and rural by 1.5%. 

Food Inflation:

Food inflation has over a third (34.58%) weightage in the CPI basket and is the commodity that hits all and sundry. YoY Food inflation was recorded at 35.5% in December against 31.16% in November 2022. In October 2022, food inflation was at an all-time high of 36.24%.

In a span of one month, the prices of fresh fruits increased by 13.4%, onions by 10%, Eggs by 9.7%, wheat by 9.45%, dry fruits by 8.8%, rice by 5.85%, chicken by 5.4%, beans 3.8%, wheat flour 3.7%, sugar 3.1%, milk fresh 1.5% over the previous month. 

However, the prices of tomatoes decreased by 54%, fresh vegetables by 24.9%, Potatoes by 21.3%, besan by 3.2%, pulse masoor by 2.4%, pulse gram by 2.1%, vegetable ghee by 2%, gram whole 1.9%, cooking oil 1.4%.

On a year-on-year basis, the prices of onions increased 415%, tea 64%, wheat 57.3%, Eggs 54.4%, gram whole 53.2%, rice 46.6%, besan 46.4%, pulse gram 45%, Chicken 43.8%, pulse moong 42.8%, mustard oil 41.5%, wheat flour 40.6%, pulse mash 38.3%, cooking oil 32%, vegetable ghee 30%, milk fresh 26%, potatoes 24.7%, dry fruits 36.2%, fresh fruits 34% and pulse masoor by 24.6%.

Inflation in Housing, Transportation and Cost of living:

Housing and utility charges have a major weightage after food in CPI. Contrary to other trends, this showed a smaller YoY increase in December of 6.95%, against 9.9% in November. 

Similarly, in Dec 2022, transportation charges were 41.2% costlier as compared to December 2021. The charges for motor fuel on a year-on-year basis increased 49.4%

The YoY Recreation and culture cost increased by 38.5%, Alcoholic beverages and tobacco 36.2% (35.9% in Nov), restaurants and hoteling 27.37% (28.37% in November). 

Similarly, furnishing and household equipment maintenance charges went up by 29.23%, health charges by 17.45% , Clothing and footwear costs increased by 17.1%, and education charges were higher by 10.9% against 11% in November 2022.

The prices of washing soap/detergents/matchbox were up by 46.6%, stationery 46.6%, construction input items 30.6%, motor vehicle accessories 29.4%, solid fuel 28.6%, woolen readymade garments 24.12%, household servant 20.5% and construction wage rates increased by 13.7% over a year, in December 2022.

The Wholesale Price Index (WPI), another indicator of grassroot level inflation, also increased by 27.1% in December 2022 against an increase of 27.7% in November 2022 and an increase of 26.2% in December 2021. The weekly Sensitive Price Indicator (SPI) also increased by 27.8% in the month under review as compared to an increase of 27.1% last month and 20.9% in Dec 2021.

The average inflation in the first half of the fiscal year (July-Dec 2022/23) was recorded at 25.02% against only 9.8% in the same period of FY22.

At mid-year, inflation rates present a gloomy tale of hardship for Pakistanis as wage rates fail to follow suit. October 2022 recorded the highest amount of inflation after the OPEC crisis of 1973-74.

 

 

 

Ghulam Abbas
Ghulam Abbas
The writer is a member of the staff at the Islamabad Bureau. He can be reached at [email protected]

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