Inflation dips to 8-month low, led by food price fall
Non-food inflation rose by 36 basis points, posing challenges for consumers in handling extra costs in healthcare and transportation
In December, the overall inflation reached a new 8-month low at 9.41%, primarily driven by a decrease in food prices, according to the Bangladesh Bureau of Statistics (BBS) data released Sunday.
Despite this improvement, the inflation rate has consistently remained above 9% since March of the previous year, with November registering at 9.49%.
A positive development is the decline in food inflation, which significantly impacts the low-income demographic. In December 2023, food inflation dropped by 1.18 percentage points to 9.58%, down from 10.76% in November.
Conversely, non-food inflation increased by 36 basis points, reflecting the challenge for consumers to manage additional expenses in areas such as healthcare and transportation.
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BBS data reveals that non-food inflation rose to 8.52% in December, up from 8.16% the previous month.
Economists say although the inflation rate dropped slightly, the suffering of ordinary people will not be significantly alleviated given the current market conditions.
Zahid Hussain, former lead economist of the World Bank's Dhaka office, said the prices of rice and vegetables decreased due to seasonal availability.
"Our core inflation is non-food-related. There is no apparent respite for this. This means that the measures taken to reduce inflation through monetary policy are not yet effective. It will take a long time to have a widespread impact," he said while talking to The Business Standard.
Zahid Hussain mentioned that easing the dollar crisis is equally important as hiking interest rates through monetary policy.
"Among the new challenges, due to the turmoil in the Red Sea, freight charges may rise. If the Red Sea tension escalates, both imports and exports will face increased freight charges. If this creates a crisis in imports, it will affect inflation," he said.
According to the BBS data, non-food inflation jumped to a 5-month high as the inflation rate for health surged to 1.16% in December from -3.83% in October. The inflation rate for health in rural areas jumped to 0.02% in December from a whopping -7.01% in October.
Despite slightly easing, the inflation rate for recreation and culture (15.59%) posted the highest inflation among the major categories. The inflation rate for clothing and footwear fell to 8.49% and housing, water, electricity, gas, and other fuels increased to 10.58%. The inflation rate for furnishings, household equipment, and routine maintenance of the house declined to 13.34% and transportation inflation dropped to 6.00%.
Urban and rural inflation
According to BBS data, rural inflation dipped to 9.48% in December, down from 9.62% in November.
This decline extended to food prices, which eased to 9.66% from 10.86% in the previous month. Meanwhile, non-food inflation jumped to 8.41% compared to a stable situation reported in the last two months that hovered around 8%.
Urban inflation remained largely stable at 9.15% in December, compared to November's 9.16%. This easing trend extended to food prices, which softened to 9.46% from 10.58% in the previous month. Non-food inflation saw a slight rise, settling at 8.39% compared to 8.17% in November.
Wage growth remains below inflation rate
The wage rate rose to 7.74% in December from 7.72% in the previous month. The wage growth has been below the inflation rate for the past 23 months.
Zahid Hussain said even though inflation has decreased, there has been no real wage growth. "The purchasing power of consumers is decreasing. This means that the suffering of the poor has not diminished," he said.
He, however, said it is encouraging that agricultural wage growth is higher than overall wage growth although the real growth is still negative. "Although agricultural wages grew by over 1%, they still fall short of inflation, leading to a decline in real wages."
