Consumer Price Inflation Moderates to 4.10 Percent

The year-on-year (y-o-y) consumer price inflation moderated to 4.10 percent in mid-August 2024 compared to 7.52 percent a year ago.

According to the latest report of Nepal Rastra Bank, food and beverage inflation stood at 6.17 percent whereas nonfood and service inflation stood at 2.94 percent in the review month. During the same period in the previous year, the price indices of these groups had increased by 8.90 percent and 6.62 percent, respectively, mentions the Current Macroeconomic and Financial Situation Report published by the central bank on Thursday.

Under the food and beverage category, y-o-y price index of vegetable sub-category increased 19.07 percent, pulse and legumes 12.09 percent, cereal grains and their products 9.15 percent and milk products and eggs 3.66 percent while y-o-y price index of spices sub-category decreased 2.75 percent.

Under the non-food and services category, y-o-y price index of miscellaneous goods and services subcategory increased 7.94 percent, alcoholic drinks 5.38 percent, clothes and footwear 4.58 percent and tobacco products 3.52 percent while y-o-y price index of insurance and financial services sub-category remained constant.

During the review month, y-o-y price index in rural areas increased by 4.28 percent, while in urban areas, it rose by 4.03 percent, the report added.

Based on provinces, y-o-y consumer price inflation in Koshi Province stood at 4.61 percent, Madhesh Province 4.17 percent, Bagmati Province 3.49 percent, Gandaki Province 3.90 percent, Lumbini Province 3.81 percent, Karnali Province 3.46 percent, and Sudurpashchim Province 6.69 percent.

In the review month, y-o-y consumer price inflation in the Kathmandu valley, terai, hill and mountain regions stood at 3.62 percent, 4.49 percent, 3.67 percent and 4.53 percent respectively. Inflation in these regions were 8.50 percent, 6.70 percent, 7.50 percent and 11.46 percent respectively a year ago.

Update of the base year of Consumer Price Index

According to the NRB, the inflation report was prepared on the basis of the updated base year of the Consumer Price Index (CPI). The central bank said that the base year has been revised to 2023/24 from 2014/15.

The household expenditure weights used for this index were derived from the fourth Nepal Living Standards Survey (NLSS-IV), conducted by the National Statistics Office in the fiscal year 2022/23, the NRB added.

In the updated Consumer Price Index, the weight for the food and beverage group is 35.49 percent and for the non-food and services group is 64.51 percent.

Previously, alcoholic drinks, tobacco products, and restaurants and hotels were included in the food and beverages group. However, in the updated index, these items have been reclassified under the non-food and services group in accordance with the COICOP (Classification of Individual Consumption by Purpose) 2018 standard.

According to the NRB, prices of 525 items are collected from weighted basket of 249 commodities to compute the price index. Of these, prices of 59 items are collected weekly, 94 monthly, and 372 quarterly. The price index is computed at the provincial level as well, added the central bank.

The NRB further said that 87 market centers have been selected across all 77 districts, including 28 from the Terai, 43 from the hill, and 16 from the mountain region for price collection. Among these, 21 are rural market centers and 66 are urban.

The new series is based on the international standards such as Consumer Price Index Manual 2020 and COICOP 2018, among others, NRB added.