inflation , causes and effetcs

Your Logo www.company.com

Inflation

BBA 5th Semester

Group II

Causes, Effects on Economy & Solutions


Group MembersPresenters

Muhammad Shahroze

Group Leader

Nida Khalil Usama Jahangir Zeeshan Ahmed

72 52 73 102

2


Presentation Summary

InflationGlobal

InflationCore Inflation

SPI

NPMCMovement in

PricesFAO Food

IndexMonthly Inflation

CPIInflation by

IncomeDecisions

Out Look of Inflation

Sasta Bazar Prices

Measures of Inflation

WPI

3


now… let’s talk about …Consumer Price Index

Sensitive Price

Indicators

Whole Sale Price Index

Decisions

NPMC

Inflation

4


What is Inflation?


1

2

3

4

1

2

3

4

Pakistan Economy Survey FY 2014-15Overview of Inflation During Fiscal Year 2014-15.

The inflation is on downward Trajectory during FY 2015-15.

Causes of Low Inflation

Better Supply of Commodities and Role of NPMC.

Budget Deficit, Appropriate Fiscal and Monetary Policies and Decline in Prices of Imported Goods, and Decrease in Petroleum Prices.

Stability in Exchange Rates, Better Production of Minor Crops and Vigilant Monitoring of Prices

Development of Sasta Bazars and Revival of Magistracy System and Prudent Expenditures

6


Measures of InflationOverview of Measurements of inflation during FY 2014-15

Summary

Various parameters are used to measures inflation like Consumer Price Index (CPI), Wholesale Price Index (WPI) and Sensitive Price Indicator (SPI). These important parameters of prices indicate a substantial deceleration in inflation.

CPI 2013-14 and 14-15

WPI 2013-14 and 14-15

SPI 2013-14 and 14-15

4.8%

PR

Comparison

8.3%

7

8.7%

0.03%

1.19% 9.8%


Divergent Trend in PricesThe divergent trend in the price indices is due to their composition, coverage and nature of items.

Wholesale PriceWholesale price covers the items which are

offered for sale in bulk by the producers

and manufacturers in primary market. Its

prices are influenced immediately by trend

in imports prices and local productivity.

WPI inflation stayed in negative zone for the

last five months in a row which is the

reflection that inflationary pressure will

further ease out in coming months.

8

Your Logo www.company.com9


Low Petrol Price

Price of PetrolIn Pakistan oil prices has been on downward trajectory since September 2014 and its pass on effect has been

realized in domestic prices.

Decline in Consumer

goods price

Success

Low Inflation Rate

Benefits for

Common Man

10


1 Dec 14

112.76 112.76 110.3 84.53 70.29 74.29

115.71 115.71 110.3 101.18 96.64 95.84

123.67 123.67 123.67 114.51 89.32 89.32

129.71 129.71 139.69 122.73 108.76 108.76

1 Jan 14 1Feb 14 1Mar 14 1Mar15 1Apr 15

INDIA

SRI LANKA

NEPAL

Comparison of Petrol PricesComparison of Petrol Prices in Pakistan and other regional countries.

In PKR

FY 2014-15

PAKISTAN

11


Historical Trend in InflationHistorically viewed, Pakistan’s experience in inflation rate over the last 25 years can be expressed in four

distinctive phases

CPI : 12.70

Food : 12.90

Non Food : 12.40

CPI : 10.58

Food : 10.64

Non Food : 10.52

CPI : 9.83

Food : 11.74

Non Food : 7.81

1990-91 1992-931991-92

12


CPI : 4.41

Food : 3.56

Non Food : 5.09

CPI : 12.00

Food : 17.65

Non Food : 7.90

CPI : 4.81

Food : 3.59

Non Food : 5.69

2000-01 2014-152007-08

13


Inflation was at double digit in the first seven years during 1990s. In the next 10 years from 1997 - 2007, inflation was

contained to single digit in the range of 3 percent to 9 percent. However, it remained very volatile during 2008 to 2012

and remained almost at double digit with varying magnitudes. Since 2013 till now April 2015, inflation moved at slow

pace despite some policy adjustments.14


now… let’s talk about …

Inflation

Sensitive Price

Indicators


Decisions

NPMC

Consumer Price Index

CPI

15


An index of the variation in prices for retail goods and other items.

Changes in CPI are used to assess price changes associated with the Cost of Living.

CPI

What is CPI???

16


Consumer Price Index (CPI) capture prices of 487 items prevailing in 76

markets in 40 big cities.

Sub Indices of CPI

Monthly Inflation By Income Group Global InflationCore Inflation FOA Food Index

17


Food 3.6%

Non-Food 5.7%

Potatos-67%

Ghee 10.3%

Chicken -9.4%

Cooking Oil -9.3

Wheat -9.2%

Rice -8.2%

Egg -2.4%

Fish -2.4%

Fruits -0.9%

Overall CPI -

1.31%

Consumer Price Index (CPI)Consumer price index, the most frequently used indicator of inflation averaged at 4.8 percent

during (July-April) 2014-15.

Inflation of diff

commodities

Inflation in 11 main Food

items

& overall Food inflation

18


Consumer Price Index (CPI)The prices of perishable food items has declined significantly as is evident from its current year index reduction to 2.2 percent

against 17 percent last year.

1. Education

Increased by 15 percent in current year which is much more against the

increase of 8.8 percent witnessed in the same period last year

1

2

4

Inflation Rate

Increased by 7 percent as

compared to 8 percent.

2. Housing

Operational

Groups

The sharp reduction

in transport group -

3.1%

4. Transportation

Increased by 8.4 %

3. Clothes & Footwear

3

Inflation Rate

19


Consumer Price Index (CPI)

03/12/201520



Inflation

Sensitive Price

Indicators


Decisions

NPMC

Core Inflation

21


It is measured through the indices of 43 commodities and represents the rate of increase in cost of goods and services excluding food and energy prices.

Decrease in Prices of 43

commodities pushed down the

Core inflation.

Other reason for slow pace of core inflation

is that with reduction in food and fuel prices

it remained quite subdued since November 2014

onward owing to the lag impact of tight monetary

policy which continued to prevail till November

2014.

It is effected by

monetary

policy and is

mostly relevant

to SBP.

Core Inflation

22


Core Inflation

03/12/201523


Monthly Inflation TrendInflation trend in Food and Non Food items of Month to Month Basis.

Year to Year Trend

On year-on-year basis the overall

inflation stood at 7.9 percent in July

2014 and declined to 2.1 percent in

April 2015.

Food Inflation

Food inflation decelerated

from 7.0 percent to -0.03

percent in April 2015.

Non Food Inflation

The non-Food inflation decelerated

from 8.5 percent in July 2014 to 3.7

percent in April 2015

Month to Month Trend

The overall inflation continued to

exhibit Decline trend since July 2014.

04 01

0203

24


Monthly Inflation Trend

03/12/2015

25


Inflation by Income GroupInflation effects all segment of society but the degree of impact varies in scale and intensity, depending upon the

economic status of individual

Analysis of ten months (July-Apr)

The Food Take Greater Share in Expenditure for Poor than the other income groups.

Inflation rate 5.2%

The highest inflation at 5.2 percent for the highest income groups

In Pakistan, majority of the population spend about half of their income on food

It is Divided into 5 income Groups

26


Inflation by Income Group

03/12/201527


Global InflationGlobal inflation has received a substantial attention in recent years.

Consumer price inflation differs considerably across the regions.

The chart below shows the six regions inflation for the

period 2001-2015.

It provides an insight in making trade and financial

decisions

28


Global Inflation

03/12/2015

29


FAO Food IndexAccording to FAO, global food prices fell across all commodities with dairy and sugar prices

experiencing the most drastic decline

The drop in dairy products prices reflect the impact of abolition of the

milk quota system which raised expectation of abundant supply. Dairy

prices were also influenced by imports prohibition imposed by the

Russian Federation.

The decrease in sugar prices was mainly due to the report of higher than

expected sugar cane production in Brazil, International palm oil prices

continued to ease as higher than expected output in Indonesia and

Malaysia with weak global demand. While decline in Wheat prices was due

to large supply and slow trade activity

Sugar , Palm Oil and Wheat Prices

Dairy Products

Other Products

30


FOA Food Index

03/12/2015

31



Inflation

Sensitive Price

Indicators

Core InflationDecisions

NPMC


32


Wholesale Price IndexIt measure the directional movement of prices.

Non Food Items

The highest decrease in Non Food items is -

1.26% while last year it was 9%.

Overall Result

Their deflationary impact to the

overall WPI movement is

estimated as -4.8%

Fuel Prices

A pronounced decline has been noted in

fuel and fuel related items-- furnace oil -

1.4%, diesel - 1.75 % and kerosene -0.1%

Index increase

The index recorded an increase of

0.03 percent during July-Apr 2014-15

against a rise of 8.3 percent during

the same period last year

04 01

0203

33


Wholesale Price Index

03/12/201534



03/12/201535



Inflation



NPMC

Sensitive Price

Indicator

36


Sensitive Price Indicator (SPI)SPI covering 53 essential items of daily use increased by 1.9 percent during July-April 2014- 15

compared to 9.8 percent in the same period last year

Food Items

10 food items with decrease in their

prices has been estimated (-) 3.2

percent while that of four items of

utility contributed as (-)1.8 percent.

Food Items

A significant decrease in Prices of

Ghee, Potatoes, chicken and

Wheat etc

Overall Results

SPI recorded a substantial slow growth

rate for 6 months with a decrease of -

2.00%

Division of Items

These 53 items are further divided

into Food and Non Food and items

of utility.

04 01

0203

37


Sensitive Price Indicator (SPI)

03/12/201538



Inflation



Sasta Bazars

National Price Monitoring Committee

(NPMC )

39


1

2

3

4

1

2

3

4

National Price Monitoring Committee (NPMC)National Price Monitoring Committee (NPMC) has been constituted on 24th January, 2011

It has been Developed under the

Ministry of Commerce

Ministry of National Food Securities & Research and Secretaries

the chairmanship of Secretary Finance Division

Ministry of Industries

40


Purposes of NPMCNPMC has mandated to

To Assess the Demand and Supply of

key Commodities.

to take/ propose corrective measures

as necessary.

1 2

41


Deliberations of NPMCThe committee has made following deliberations:

A sub Committee was constituted to develop

actionable measure for removing hike in the prices of Pulses, Tomato and Milk

Powder etc

CCP to Control hording, Profiting and breaking cartelization in order

to pass benefits to general consumersa

Ministry of IPC to Expenditure the process of Revival of

Executive Magistracy System

The Committee Played an Active Role to control prices and ensures smooth supply of essential goods.

01

02

03

04

Low Inflation

42



Inflation



NPMC

Sasta Bazaar Prices

43


Sasta Bazaars are developed to

provide essential goods to

consumers on cheap/Low Prices.

In the first week of May 2015 in Sasta Bazaar of

the country including Islamabad reveals a wide

variation in their prices to be compared with

Open Market Prices

Sasta Bazaar PricesAn overview of Goods prices in Sasta Bazaar

Sasta Bazaar

Items with significant decline in their prices at Sasta

Bazar include potatoes, onion, tomatoes, red chilies,

garlic, pulses and chicken farm etcGoods

Price Comparison

44


Sasta Bazaar PricesRole of Government in Success of Sasta Bazaar

1. Provincial governments

It also monitor the prices and supply of essential items and taking various proactive measures to ease the prices for the benefit of common man in the country

1

2

4

Sasta Bazaar

The provincial governments have also

activated their District Price Control

Committees to check and maintain the

prices.

2. District Price Control

Committees

In NPMC meeting it was argued to investigate and

take necessary steps to control undue price hike so

that the benefits may reach to the consumers

4. NPMC

The Provincial Govt. also established Sasta Bazaars

for the consumers where they can get Food items at

reasonable prices.

3. Establishment of Sasta Bazaars

3

Sasta Bazaar

45


Sasta Bazaar Prices

03/12/2015

46


Movement in Prices of Essential GoodsThe movement of 28 essential items from Jun 2013 to April 2015 is presented

graphically

Overall Effect

On the whole, it is observed that

prices of essential items are

easing out over time.

47


Movement in Prices of Essential Goods

03/12/2015

48


Movement in Prices of Essential Goods

03/12/2015

49


Regional Situation of PricesComparison of Prices of Essential Goods with Neighbor Countries

In comparison with the regional countries Pakistan is the lowest in the prices of Wheat, Wheat Flour, Chicken farm, Gram Pulse, Petrol, Eggs and

Red Chilies than those of other regional countries. The large variation in prices of some S specific items like meat and poultry products is due to

different consumption pattern and socio cultural variation.

Analysis

22-04-2015India

30-04-2015Pakistan

27-04-2015Bangladesh

50


Regional Situation of Prices

03/12/2015

51


Estimated

8.00%

Outlook of InflationAn overview of inflation during FY2015-15

FY2014-15

Actual increase

4.8%

Success

Low Inflation Rate

Future Expectations of inflation

52


OverviewVideo

53

inflation , causes and effetcs

Economy & Finance