Farooq Awan

Core inflation in Pakistan remained elevated in December despite a broader easing in headline inflation, indicating that underlying price pressures persist across key non-food sectors, according to the latest data released by the Pakistan Bureau of Statistics (PBS).

The non-food, non-energy (NFNE) inflation rate stood at 6.9 percent on a year-on-year basis in December, up from 6.6 percent in the previous month. On a month-on-month basis, core inflation increased by 0.5 percent, highlighting continued pressure from structural cost components such as housing, healthcare, education and other essential services.

While headline inflation eased to 5.6 percent during the month, largely due to falling food prices, the persistence of elevated core inflation suggests that underlying price pressures remain entrenched. Core inflation, which excludes volatile food and energy items, is considered a key indicator of demand-side and structural inflation trends.

According to the data, urban core inflation stood at 6.9 percent in December, while rural core inflation was even higher at 8.1 percent. Both segments recorded monthly increases, reflecting rising costs in essential non-food categories. Housing-related expenses, including rent and utility charges, continued to contribute significantly to upward pressure, alongside increases in education and healthcare costs.

The education category registered noticeable price increases during the month, driven by higher tuition and institutional fees. Similarly, healthcare costs rose further due to increased charges for medical services and diagnostics. These components remained largely unaffected by the decline in food prices, underscoring the rigidity of non-food inflation.

Analysts note that while easing food prices have provided temporary relief to consumers, persistently high core inflation suggests that cost pressures remain embedded in the economy. The continued rise in service-sector prices indicates that inflationary pressures are not solely supply-driven but also reflect broader structural and cost-based factors.

The persistence of elevated core inflation may complicate the outlook for price stability, as it limits the extent to which overall inflation can decline in the near term. Policymakers are expected to closely monitor core inflation trends, as sustained moderation in this area is critical for ensuring durable price stability.

The December data underscores the divergence between food and non-food inflation, highlighting that while headline inflation has eased, underlying cost pressures continue to pose challenges for households and policymakers alike.

Credit: INP-WealthPk