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CPI inflation surges faster than expected in October to 26.6%

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  • CPI inflation up 4.7% compared to fall of 1.2% in Sept 2022.
  • Numbers mostly in line with the market expectations.
  • Impact of the high-base effect to kick in down the line.

ISLAMABAD: Accelerating faster than anticipated, Consumer Price Index (CPI)-based inflation for October 2022 surged to 26.6% year-on-year,  latest data showed, chiefly fueled by high-priced food and a hawkish monetary outlook. 

According to the Pakistan Bureau of Statistics (PBS), consumer prices rose 4.7% compared to a fall of 1.2% in September 2022 month-on-month. 

The inflation is not far from a 47-year high.

The inflation crossed 20% in June 2022, topping the 47-year high of 27.3% in August 2022 year-on-year.

PBS in a statement said the rise in consumer prices in October from last month was boosted mainly by electricity and food prices, while the higher CPI from October last year was caused by rising costs of food and fuel.

The numbers are in line with the market expectations.

The market was mostly bracing for the headline inflation to increase by 4% month-on-month. 

Moreover, food inflation swelled 36.2% year-on-year, while transport prices sped up 53.4%, clothing and footwear prices rose 18.3% and housing, water and electricity costs rose 11.9%.

Brokerage Ismail Iqbal Securities had projected the inflation to clock in at 25.7% as against 23.2% in September. “Overall, we expect FY23 average inflation at 22%. The sequential increase will be led by normalisation of electricity tariff, quarterly house rent revision, and higher perishable food prices,” the brokerage said in a report. 

“The impact would be diluted to some extent by a reduction in petroleum prices,” it added.

However, analysts see the impact of the high-base effect in December, while the announcement of a number of subsidies on several items amid cooling international commodity markets might reduce inflation pressure to around 22-23% in November.

The CPI inflation in urban areas was registered at 24.6% year-on-year in the month under review as against an increase of 21.2% in September 2022 and 9.6% in October 2021.

It rose to 4.5% in October 2022 month-on-month compared to a fall of 2.1% in the previous month and an uptick of 1.7% in October last.

In rural areas, CPI inflation touched 29.5% year-on-year in the outgoing month vis-à-vis an increase of 26.1% in the previous month and 8.7% in October 2021.

It, month-on-month, increased to 5.0% in October 2022 as compared to an increase of 0.2% in the previous month and an increase of 2.2% in October last year.

Increasing inflationary pressures remain a major threat to the economy amid eroding foreign exchange reserves.

State Bank of Pakistan (SBP) in its Monetary Policy Committee (MPC) meeting held the interest rate unchanged, citing that the prevailing stance sustains just the right balance between managing inflation and maintaining the growth rate post-floods.

“On the one hand, inflation could be higher and more persistent due to the supply shock to food prices, and it is important to ensure that this additional impetus does not spill over into broader prices in the economy. On the other, growth prospects have weakened, which should reduce demand-side pressures and suppress underlying inflation,” MPC had said.

According to CPI numbers, inflation increased the sharpest in transport, food, housing, and restaurant and hotel groups in the outgoing month.

Persistently high inflation has severely strained the economy which is also under pressure from falling foreign exchange reserves, the rupee rout, and a yawning current account deficit.

SBP-held foreign exchange reserves stand at $7.4 billion, hardly enough to cover one month’s imports.

Devastating floods in August claimed more than 1,700 lives, while multiplying the economic problems by wiping out crops and infrastructure.

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Significant surge in the price of gold in Pakistan

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On Friday, the price of gold in Pakistan continued to increase.

According to the All-Pakistan Gems and Jewellers Sarafa Association, the price of 24-karat gold per tola has risen by Rs2,200, reaching Rs249,000.

The price of 10-gram 24-karat gold increased by Rs1,886, reaching a total of Rs213,477. On Thursday, the cost of 10 grammes of 22-karat gold was Rs195,687.

The global gold market likewise had a rising trajectory. As per APGJSA, the worldwide rate was $2,404 per ounce, showing a decline of $24 during the course of the trading day.

The local market witnessed constant silver prices at Rs2,900 per tola.

Market observers attribute the increase in gold prices to other variables, such as volatility in the global market, currency exchange rates, and economic conditions. The ongoing surge in gold prices is likely to impact investment choices and consumer behaviour in the near future.

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Gold prices in Pakistan have risen by Rs 1,200 per tola.

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The price of one tola of 24 carat gold rose by Rs1,200 and reached Rs246,800 on Thursday, compared to its previous sale price of Rs245,600 on the last trading day.

According to the All Sindh Sarafa Jewellers Association, the cost of 10 grammes of 24 karat gold rose by Rs1,029 to reach Rs211,591, compared to the previous price of Rs210,562. Similarly, the price of 10 grammes of 22 carat gold jumped from Rs193,016 to Rs193,959.

The price of silver remained unchanged at Rs2,900 per tola and Rs2,486.28 per ten grammes.

According to the association, the international market price of gold rose by $10, reaching $2,382 from $2,372.

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The federal government has declared wage and pension increments for its employees.

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The Ministry of Finance has formally declared a rise in the remuneration and retirement benefits of personnel working for the federal government, offering substantial economic alleviation.

According to the notification, personnel in grades 1 to 16 will experience a 25% increment in their salaries, while officials in grades 17 to 22 will be granted a 20% rise. The implementation of this modification will commence on July 1, 2024, and will be applicable to the employees’ fundamental remuneration.

In addition, retired federal government employees would receive a 15% rise in their pension payments. This increase is applicable to retirees from both the civilian and military sectors. It is important to mention that employees who retire on or after July 1, 2024, will also qualify for this pension rise.

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The 15% increase in pension will be computed based on the amount of pension received by retired employees after deductions. Nevertheless, the letter specifies that ad hoc aid will not be factored into the calculations for pension and gratuity.

Moreover, this increment will have no effect on the calculation of housing rent allowances for employees.

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