Chapter-3
Prices and Wages
Consumer Prices Chart 3.1
3.1 During FY05, consumer price inflation National CPI inflation (12-month
depicted an increasing trend. While 12-month average : base FY96=100)
12
point to point CPI inflation (base: FY96=100) 10
increased from 5.6 percent in FY04 to 7.4 8
Percent
percent in FY05, average inflation measured by 6
12-month average movements in CPI index 4
indicated an increase from 5.8 percent in FY04
2
to 6.5 percent in FY05 (Chart 3.1). The
0
increases in inflation rate were mainly due to
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
increases in the prices of food and petroleum
products in the international market (Table 3.3). General Food Non-food
The point to point food price inflation showed a
mixed trend during FY05. It accelerated from
6.6 percent in June 2004 to 10.5 percent in Chart 3.2
October 2004 and then declined to 6.5 percent Rural CPI inflation (12-month
in January 2005. It began to increase again and average : base FY96=100)
stood at 8.7 percent in June 2005. The non-food 12
10
prices, on the other hand, declined from 4.3
8
percent in June 2004 to 3.7 percent in
Percent
6
December 04 and then displayed an increasing
4
trend and reached 5.3 percent in June 2005. 2
0
3.2 The 12-month average food prices inflation
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
increased by 7.9 percent in FY05 compared
General Food Non-food
with 6.9 percent increase in FY04, while the
non-food component increased at a lower rate
by 4.3 percent in FY05 compared with 4.4 Chart 3.3
percent increase observed in FY04 (Table 3.1,
Chart 3.1). Annual average CPI inflation in the Urban CPI inflation (12-month
rural areas increased by 6.6 percent in FY05, average : base FY96=100)
12
relative to 5.8 percent increase of FY04 (Table
10
3.1, Chart 3.2). The food prices component rose 8
Percent
by 8.0 percent in FY05 relative to 6.6 percent 6
increase in FY04, while the non-food 4
component increased at a lower rate by 4.3 2
0
percent in FY05 against 4.5 percent rise in
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY04. Annual average CPI inflation in the urban
areas increased slightly by 6.1 percent in FY05, General Food Non-food
against 6.0 percent increase in FY04 (Table 3.1,
17
Chapter-3 Prices and Wages
Chart 3.3). The food prices component of urban
CPI increased at a lower rate by 7.7 percent in Table 3.1 Annual average CPI inflation (base FY96=100)
FY05 compared with 7.8 percent increase in Group Weight FY03 FY04 FY05
FY04, while the non-food component increased a. National level
by 4.5 percent in FY05 compared with 4.1 General Index 100.00 135.97 143.90 153.24
percent increase in FY04. Rural consumers (4.38) (5.83) (6.49)
experienced higher price inflation in FY05 than Food 58.84 137.01 146.50 158.08
(3.46) (6.93) (7.90)
the consumers in urban areas for the food Non-food 41.16 135.13 141.03 147.14
components and lower price inflation for the (5.66) (4.37) (4.33)
non-food component of their consumption b. Rural
basket. The higher food inflation for rural General Index 100.00 136.58 144.46 154.03
(4.74) (5.77) (6.62)
consumers may be explained by the higher Food 62.96 136.29 145.22 156.82
weight for the food component of the (4.05) (6.55) (7.99)
consumption basket in the rural areas (62.96 Non-food 37.04 137.06 143.18 149.29
(5.91) (4.47) (4.27)
Percent) than that of the urban areas (48.80
c. Urban
Percent) which influenced the food index for the General Index 100.00 134.49 142.54 151.29
rural consumers. (3.52) (5.99) (6.14)
Food 48.80 138.77 149.60 161.14
(2.09) (7.80) (7.71)
3.3 The increase in consumer prices in FY05 Non-food 51.20 130.40 135.80 141.90
was due mainly to lack of adequate supply of (5.00) (4.14) (4.49)
foodgrain because of poor harvesting of Aus,
wheat and Aman crops and increase in Source : Bangladesh Bureau of Statistics.
Figures in parentheses represent annual inflation.
international prices of food and petroleum.
Private consumption expenditure increased with
the announcement of the 6th national pay scale Table 3.2 Inflation* trend in SAARC and other
for the government employees during FY05, neighboring countries
which also partly influenced the price level. The
depreciation of Taka-Dollar exchange rate Name of 2001 2002 2003 2004 2005
(annual average) from Taka 58.94/US$ in FY04 Countries (June)
to Taka 61.39/US$ in FY05 also contributed to 1. Bangladesh@ 1.9 2.8 4.4 5.8 6.5
the price increase. In response to significant 2. India 3.7 4.4 3.8 3.8 3.3
increases in international oil prices the 3. Pakistan 3.2 3.3 2.9 7.4 8.7
government adjusted the administered prices 4. Nepal 2.7 3.0 5.7 2.8 6.2
of fuel two times (by increasing the prices of 5. Bhutan 3.4 2.5 2.1 4.6 N. A.
kerosene and diesel by 28.0 percent and petrol 6. Sri Lanka 14.2 9.6 6.3 7.6 9.4
by 6.1 percent) during FY05. This price increase
7. Maldives 0.7 0.9 -2.9 6.4 3.5
of petroleum and energy fed into the prices of
food and non-food goods and services, Other Asian Countries
including transport and trade.
8. Thailand 1.6 0.6 1.8 2.8 3.8
9. Singapore 1.0 -0.4 0.5 1.7 0.2
3.4 The inflationary phenomenon noted above
10. Malaysia 1.4 1.8 1.1 1.5 3.2
was also shared by other developing countries
in the South Asia region. Available data indicate 11. Indonesia 11.5 11.9 6.6 6.2 7.4
that CPI inflation in Sri Lanka, Pakistan and 12. Korea 4.1 2.7 3.6 3.6 2.7
Nepal also accelerated during FY05 (Table 3.2).
Source : Bangladesh Bureau of Statistics (BBS), International
In FY05 average inflation accelerated in all Financial Statistics (IFS), IMF, November 2005 and Web-sites.
countries of South Asia triggered by rise in oil
prices in international market. It was the highest * = Consumer Price Index (base : 2000=100). N.A. = Not
available. @ = Consumer Price Index (base : 1995-96=100),
in Sri Lanka, followed by Pakistan, Bangladesh figures relate to financial year (July-June).
and Nepal.
18
Prices and Wages Chapter-3
Chart 3.4
Table 3.3 Changes in international prices of major commodities
South Asian inflation environment (Percent)
16
Commodity 2001 2002 2003 2004 2005 (up
14 to June)
12
10 Petroleum -13.8 2.5 15.8 30.7 42.7
Inflation
Cotton -18.7 -3.6 37.1 -2.3 -12.9
8
Rice -15.2 11.1 4.0 23.2 16.8
6
Wheat 11.2 17.1 -1.6 7.3 -9.5
4
Palm oil -7.5 49.6 15.0 5.9 -15.0
2
Soybean oil 4.6 18.1 22.1 18.0 -10.3
0 Sugar -5.1 4.3 8.8 12.1 -0.7
1998 1999 2000 2001 2002 2003 2004 June 05
Bangladesh India Pakistan Sri Lanka
Source : International Financial Statistics, IMF, November 2005.
Table 3.4 Annual average national level CPI by consumption basket sub-groups (base FY96=100)
Group/sub-group Weight FY03 FY04 FY05 % Change % Change
(4-3) (5-4)
1 2 3 4 5 6 7
General index 100.00 135.97 143.90 153.24 5.83 6.49
1. Food, beverage and tobacco 58.84 137.01 146.50 158.08 6.93 7.90
2. Non-food of which 41.16 135.13 141.03 147.14 4.37 4.33
i) Clothing & footwear 6.85 130.55 136.25 142.15 4.37 4.33
ii) Gross rent, fuel & lighting 16.87 131.20 136.19 141.43 3.80 3.84
iii) Furniture, furnishing, household
equipment & operation 2.67 132.33 137.95 143.18 4.25 3.79
iv) Medical care & health expenses 2.84 145.25 154.36 162.47 6.27 5.25
v) Transport and communications 4.17 159.52 170.79 179.94 7.06 5.36
vi) Recreation, entertainment, education & cultural services 4.13 136.94 141.31 150.23 3.19 6.31
vii) Miscellaneous goods and services 3.63 129.40 133.82 137.78 3.42 2.96
Source : Bangladesh Bureau of Statistics.
Chart 3.5 Trends of Wholesale Prices
Changes in international commodity prices
50 3.5 Wholesale price data are relatively weak
40 and base year (FY70) has not been updated
Percentage change
30 yet. Data reported by the BBS indicate that
20 annual average indices of wholesale prices
10 increased at a lower rate by 3.4 percent in FY05
0 compared with 3.7 percent in FY04. The
-10 agricultural products component of wholesale
-20
price inflation was 3.3 percent in FY05 against
2001 2002 2003 2004 June 05 3.7 percent of FY04, while the industrial
Rice Wheat Petroleum Sugar
products component was 3.6 percent in FY05
19
Chapter-3 Prices and Wages
against increase of 3.5 percent in FY04 (Table Chart 3.6
3.5, Chart 3.6). The higher (7.9 percent) FY05 Trends of wholesale price index (base FY70=100)
increase in the food component of consumer 2100
price inflation than the agricultural products 2000
component of wholesale price inflation (3.3 1900
percent) may be attributable to the higher rise 1800
in transport cost and distribution margin and 1700
Index
1600
other non-economic factors affecting retail
1500
prices. 1400
1300
3.6 In FY05 the 3.6 percent increase in the 1200
industrial products component of the wholesale FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05
price index compared with the 4.3 percent Overall Agricultural Industrial
increase in the non-food component of the
Table 3.5 Trends of wholesale price indices (base FY70=100)
FY93 FY94 FY95 FY96 F97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05
Overall 1346 1413 1479 1559 1568 1648 1760 1753 1726 1730 1822 1889 1954
(1.7) (5.0) (4.7) (5.4) (0.6) (5.1) (6.8) (-0.4) (-1.5) (0.2) (5.3) (3.7) (3.4)
Agricultural 1353 1437 1519 1606 1611 1701 1848 1847 1802 1810 1922 1994 2060
(weight 67.9) (1.5) (6.2) (5.7) (5.7) (0.3) (5.6) (8.6) (-0.05) (-2.4) (0.4) (6.2) (3.7) (3.3)
Industrial 1331 1361 1392 1458 1478 1537 1573 1526 1563 1562 1610 1667 1727
(weight 32.1) (2.1) (2.3) (2.3) (4.7) (1.4) (4.0) (2.3) (-3.0) (2.4) (0.1) (3.1) (3.5) (3.6)
Source : Bangladesh Bureau of Statistics.
Figures in parentheses represent annual rates of inflation.
consumer price index likewise is the result from
the non inclusion of price increases in utilities Table 3.6 Trends of wage rate indices
(base FY70=100)
and some services used by consumers (without
any wholesaling arrangement) in the industrial FY01 FY02 FY03 FY04 FY05
component of wholesale price inflation. General 2488.8 2637.2 2926.3 3111.1 3292.9
(4.15) (5.96) (10.96) (6.31) (5.85)
Wage Rate Trends Manufacturing 2831.6 3034.5 3501 3765.4 4015.0
(4.82) (7.17) (15.37) (7.55) (6.63)
3.7 Annual wage rate indices reported by the
Construction 2356.5 2443.7 2624.3 2668.5 2758.2
BBS (Table 3.6, Chart 3.7) indicate that the
(3.07) (3.70) (7.39) (1.69) (3.36)
wage rate increased at a lower rate in FY05 than
in FY04. Wage rate increase in FY05 in the Agriculture 2140.9 2262.4 2442.6 2581.5 2719.2
manufacturing sector was 6.6 percent as against (5.10) (5.67) (7.79) (5.69) (5.33)
7.6 percent increase observed in FY04. The
wage rate increase in the manufacturing sector Fishery 2292.4 2410.8 2562.6 2774.8 2957.3
(6.6 percent) and fisheries sector (6.6 percent) (3.24) (5.16) (6.29) (8.28) (6.58)
exceeding the CPI (6.49 percent) may have also
contributed to the gradual decline of poverty of Source : Bangladesh Bureau of Statistics.
Figures in parentheses are annual percentage changes.
the population in the lowest income brackets.
20
Prices and Wages Chapter-3
3.8 The general wage rate increased at a lower Chart 3.7
rate by 5.9 percent in FY05 compared to 6.3
Wage rate index trends by sectors (base FY70=100)
percent in FY04. Wage rate in manufacturing
4300
sector, agricultural sector and fisheries sector 4100
increased by 6.6 percent, 5.3 percent and 6.6 3900
3700
percent in FY05 as compared to 7.6 percent, 5.7 3500
percent, and 8.3 percent respectively in FY04. 3300
3100
Wage rate in construction sector significantly
Index
2900
increased by 3.36 percent in FY05 as compared 2700
2500
to 1.7 percent in FY04. The changes in the 2300
annual wage rate indices were positive for all 2100
1900
sectors in FY05. 1700
FY99 FY00 FY01 FY02 FY03 FY04 FY05
General Manufacturing Construction
Medium Term Inflation Outlook Agriculture Fishery
3.9 Global inflation in 2005 has picked up
slightly mainly in response to higher oil prices.
Table 3.7 Global inflation environment
However, consumer price inflation is projected to (Percentage changes in consumer prices)
remain low (2.2 percent) in advanced countries
2003 2004 2005* 2006*
and moderate (5.9 percent) in emerging and
developing countries, as well as in South Asia Advanced economies 1.8 2.0 2.2 2.0
(4.7 percent) in 2005 as compared to the Other emerging market
and developing countries 6.0 5.8 5.9 5.7
previous year (Table 3.7). In Bangladesh,
inflation has been at single digit and is South Asia 3.9 4.3 4.7 5.6
maintaining a moderate rate during last few Bangladesh 5.4 6.1 6.2 5.8
years. Direct inflationary effects of the oil price India 3.8 3.8 3.9 5.1
increase have been limited due to the Pakistan 2.9 7.4 9.9 9.8
incomplete pass through in view of the Sri Lanka 6.3 7.6 14.0 7.5
administered retail price of petroleum products in
Source : WEO, September 2005, IMF.
the domestic market. However, increased prices * Projection.
of imported goods combined with the rise in
import prices due to Taka depreciation also
fueled inflationary pressures in the economy. pass on of increased oil prices to consumers,
The inflationary pressure is also shared by many average inflation in Bangladesh is projected at
developing and emerging countries, including 6.5 percent in FY06 and then would come down
the countries of South Asia. Assuming some gradually to 4.5 percent in FY09.
21
