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Inflation in the FY 2007-08
The CPI-based inflation during July-April 2007-08 averaged 10.3 percent as against 7.9 percent in the same period last year. The single largest component of the CPI is the food group, which makes up 40.34 percent of the CPI, and it showed an increase of 15.0 percent. This was higher than the 10.2 percent food inflation observed over the corresponding period of last year. A further breakdown of food inflation into perishable food items and non-perishable food items reveals some interesting facts. The rise in the price of perishable food items stood at 8.7 percent whereas nonperishable food items stood at 13.6 percent. Based on the current trend observed, the contribution of food inflation to the overall CPI is estimated at 59 percent and non-food inflation at 40 percent as against 52.4 percent and 47.2 percent respectively in the comparable period last year. On the other hand, the non-food prices grew at a slower pace compared to last year. Non-food inflation averaged 6.8 percent during July -April 2007-08 while it stood at 6.2 percent in the corresponding period last year. The non-food-non-energy inflation (core inflation) was also higher at 7.5 percent in first ten months of the fiscal year 2007-08 as against 6.0 percent in the same period last year, on account of the rising house rent and Medicare sub-indices. Several domestic and international factors have contributed to the extraordinary surge in the domestic price levels in Pakistan. The high price of food and energy in the international markets can be primarily blamed on a confluence of factors that are not only structural and cyclical in nature but also involve demand and supply dynamics. Structural factors have dominated in recent times and a closer look at them will reveal important insights on the cause of inflation that is currently gripping the world.