Price and Inflation. Chapter-3. Global Inflation Scenario

Transcription

1 Global Inflation Scenario. Higher energy prices lifted headline inflation rates in advanced, emerging market and developing economies in the first six months of. Core inflation (excluding food and energy price) remained below central banks targets in most advanced economies. Among emerging market and developing economies, excluding Venezuela s hyperinflation, core inflation was below the average of recent years but inched up in recent months (World Economic Outlook, October ). Consumer Prices in Bangladesh. Annual average inflation based on Consumer Price Index (CPI) reported an upward trend throughout FY except for the last two months of the financial year under review. The headline inflation rate stood at. percent in June, while the Bangladesh Bank Monetary Policy Statement (MPS, January-June ) had an inflation forecast range of.-. percent for the same period. The average inflation rate was. percent in FY (Table., Chart. and Appendix- Table VII). The average Inflation rate steadily inched up since July (. percent) until April (. percent). For the following two months of FY the inflationary pressure gradually eased. Rising food inflation was mainly responsible for the increase in headline inflation rate despite declining non-food inflation rate during the first half of the fiscal year. The non-food inflation rate had an upward trend for the remaining second half of the financial year. Table. Monthly Inflation in FY Months Jul... Aug... Sep... Oct.9.9. Nov... Dec... Jan... Feb.9.. Mar... Apr... May... Jun... Chart. Monthly CPI Inflation in FY Jan- Feb- The twelve month point-to-point inflation rate stood at. percent in June compared to.9 percent in June. Mar- Apr- May- Jun- Chart. Monthly CPI Inflation in FY (Point-to-point : FY=) Jan- Feb- Mar- Apr- May- Jun-

2 . Annual average food inflation had a sustained rise during July (. percent) to April (. percent), which posted consecutive lower rates in the remaining two months of FY.The average food inflation rate for May and June stood at. percent and. percent respectively. The average food inflation rate was. percent in June. On the other hand, the annual pointto-point food inflation recorded a mixed trend during July (.9 percent) to January (. percent) followed by a declining trend for rest of the financial year, that is from February (. percent) to June (.9 percent). The point-to-point food inflation stood at. percent in June (Appendix- Table VII).. Annual average non-food inflation rate showed a declining trend during the first half of FY, while it had a reverse direction for the rest of the financial year. The average non-food inflation rate stood at. percent in July, which gradually fell to. percent in December. Since January, the average nonfood inflation rate kept rising and reached. percent at the end of FY.The average nonfood inflation rate was. percent in FY. On the other hand, annual point-to-point non-food inflation rate depicted mixed trend throughout FY. The rate stood at. percent at the beginning of FY and finally settled at. percent in June, with movement in both direction increasing and decreasing in the months between. The annual point-to-point non-food inflation rate in June was. percentage point higher than June rate of. percent point (Appendix- Table VII). Table. Annual Average CPI based Inflation (FY=) Group Weight FY FY FY FY a. National level General Index (.) (.9) (.) (.) Food (.) (.9) (.) (.) Non-food (.99) (.) (.) (.) b. Rural General Index (.) (.) (.9) (.9) Food (.) (.) (.) (.9) Non-food (.) (.) (.) (.) c. Urban General Index (.) (.) (.) (.9) Food (.) (.) (.) (.) Non-food (.) (.) (.) (.) Note: Figures in parentheses represent annual inflation Source: Bangladesh Bureau of Statistics (BBS). Chart. Core CPI Inflation Jan- Feb- Source: Research Department, Bangladesh Bank. Chart. Mar- Apr- (point-to-point) May- Jun- Rural CPI Inflation FY FY FY FY FY. Core inflation (non-food and non-fuel price) on point-to-point basis increased by a large margin to. percent in June

3 Table. Annual Average National Level CPI by Consumption Basket Sub-groups (base: FY=) Group/sub-group Weight FY FY FY % Change FY % Change FY General index Food, beverage and tobacco Non-food of which i) Clothing & footwear ii) Gross rent, fuel & lighting iii) Furniture, furnishing, household equipment & operation iv) Medical care & health expenses v) Transport and communications vi) Recreation, entertainment, education & cultural services vii) Miscellaneous goods and services compared to. percent in June (Chart.).. In FY, average rural inflation was. percentage point lower than average unban inflation. In June, the annual average rural inflation rate was calculated at.9 percent, while it was.9 percent for urban areas. The annual average rural inflation rate for FY stood at.9 percent. The average rural food inflation increased to.9 percent in June from. percent in June. On the other hand, the average rural nonfood inflation slid to. percent in June compared to. percent in June (Table., Chart. and Appendix- Table VII).. The annual average urban inflation declined to.9 percent in June from. percent in June. The average urban food inflation rose to. percent in June from. percent in June. On the other hand, the average urban non-food inflation slid to. percent in June from. percent in June (Table., Chart., Appendix- Table VII).. Total foodgrains production (rice and wheat) increased by. percent to. million metric tons in FY compared to. Chart. Urban CPI Inflation (-month average : base FY=) FY FY FY FY FY Table. Inflation in SAARC and Other Asian Countries # Countries. (July). India (March). Pakistan..... (July). Nepal (March). Bhutan Sri Lanka..... (June). Maldives (March) Other Asian Countries. Thailand (July) 9. Singapore (June). Malaysia (June). Indonesia..... (August). Korea (August). Myanmar ( March) - Not available BBS, Consumer Price Index (Base: FY=) and figures relate to financial year (July-June). # International Financial Statistics, October. million metric tons in FY. Total government procurement of foodgrains stood at. million metric tons in FY, lower by. million metric ton than that of FY. Government and private 9

4 imports of foodgrains totalled at 9. million metric tons in FY, which was about. million metric tons higher than FY foodgrains imports. The government distributed. million metric tons of foodgrains under its Public Food Distribution System (PFDS) in FY, which was slightly lower than the preceding financial year s amount. Inflation in SAARC and Other Asina Countries.9 Among the SAARC countries, Nepal had the highest inflation rate of. percent in March followed by Pakistan (. percent, July ), Bangladesh (. percent, July ) and India (. percent, March ). Indonesia (. percent, August ) and Sri Lanka (. percent, June ) reported moderate inflation rates. Unlike other countries, Maldives had deflation (-. percent) in March (Table. and Chart.). Wage Rate Trends. The growth of general wage rate index declined by. percentage point to. percent in FY. The agriculture and industry sector indices had higher growth rates in FY, whereas the services sector index growth retarded. The production sub-sector index reported the highest growth rate of. percent, while the construction sub-sector index scored the lowest growth rate of. percent in FY (Table., Chart.). Near Term Inflation Outlook. Inflation is expected to rise this year across both advanced, emerging market and developing economies largely reflecting recent increases in commodity prices. In advanced economies, it is projected to pick up to percent Chart. South Asian Inflationary Situation 9 Bangladesh* India Pakistan Sri Lanka Nepal Sources: BBS, figures relate to financial year (July-June) and IFS, October. Table. Trends of Wage Rate Indices (base: FY=) FY FY FY FY General (.9) (.) (.) (.) Agriculture.... (.) (.) (.9) (.) Agriculture...9. (.) (.) (.) (.) Fish (.) (.) (.) (.) Industry (.) (.) (.) (.) Construction (.9) (.) (.) (.) Production.... (.) (.) (.) (.) Services.... (.9) (.) (.) (.) Note: Figures in parentheses are annual percentage changes. in, from. percent in. Inflation in emerging market and developing economies excluding Venezuela is expected to increase to. percent this year from. percent in (Table-.). Among advanced economies, core inflation will rise over the forecast horizon, with differentiation across countries mostly based on cyclical positions. Within the group of emerging market and developing economies, core inflation rates are expected to be more dispersed than among advanced economies. To a large extent, the dispersion reflects

5 variation in cyclical positions, anchoring of inflation expectations, and inflation targets.. Food and Agriculture Organization (FAO) in its biannual publication Food Outlook July, reported that amid increased uncertainties from recent rising trade dispute, agricultural markets so far remained relatively stable thanks to generally good supply conditions across most commodities. The report also added that in the context of heightened food import bills, food markets would remain vulnerable, with weather shocks and external developments always difficult to predict. The world rice production is forecast to grow by. percent in to. million tons. Total world wheat production in is expected to be. million tons,. percent lower than production. The FAO food price index for June stood at., which was. in June.. In FY9 national budget, the target for the average inflation rate was set at. percent. In the first five months of FY9 (November ), the average inflation rate was. percent, slightly above the annual target level. The average food and non food inflation rates for the same month were. and. percent respectively. Higher global commodity prices and exchange rate movements together pose upside risks to inflation in FY9. Inflation expectation survey (July, ) conducted by Bangladesh Bank also reveals the upside risks, about percent of the respondents anticipate one-year-ahead average inflation to be above Chart. Growth Rate of Wage Index (FY=) 9 FY FY FY FY FY General Industry Construc on Agricultural Services Fish Table. Global Inflationary Situation (Percentage change) 9 P Advanced Economies....9 United States.... Euro Area.... Emerging Market and Developing Economies.... Emerging and Developing Asia.... Bangladesh.... India....9 Sri Lanka.... Pakistan P Projection Source: World Economic Outlook, October. percent. BBs projection shows that the average inflation rate would be around.-. percent in December, assuming no severe domestic or external shocks. Looking ahead, inflation outlook would likely remain relatively favorable in FY9, assuming no significant pickup in election-related political tension. A good harvest of food production may offset some inflation risks from the pass-through effects of global oil and commodity prices. However, rising non-food inflation and inflation expectations may constrain any significant improvement in the inflation momentum.