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December 6, 2017



CPI inflation reaches five-month high of 4pc on high oil, food prices

KARACHI: Annual inflation reached five-month high of four percent in November as food and oil prices increased.

Pakistan Bureau of Statistics (PBS) data showed on Tuesday that consumer price index (CPI) inflation clocked in at 3.8 percent year-on-year both in October and November 2016.

PBS recorded annual inflation at five percent in May as demand ramped up along with prices of oil and international commodity. But, it edged sharply down to 3.9 percent in June due to slowdown in economic activities.

CPI inflation increased 0.4 percent in November as compared to an increase of 0.7 percent in the previous month and increase of 0.2 percent in November 2016.

In July-November, average CPI inflation stood at 3.59 percent as compared to 3.92 percent in the corresponding period a year earlier.

The central bank expected a rise in inflation in the coming months due to higher international oil prices along with pass-through to domestic petroleum prices and imposition of regulatory duty on non-essential import items.

“… Inflation is still expected to fall inside the range of 4.5-5.5 percent projected at the start of FY18,” the State Bank of Pakistan (SBP) said in a two-month monetary policy announced in late November.

SBP kept its key policy rate unchanged at 5.75 percent – the level that has been maintained since May last year in line with its pro-growth approach and to help the government achieve six percent growth target in FY2018.

Analyst Hamza Kamal at First Capital Equities Ltd. does not expect an interest rate hike through the current fiscal year of 2017/18.

“Inflation is expected to cross five percent in the later part of FY18 that can prickle market sentiments,” Kamal said. “Our FY18 inflation projection implies a comfortable real interest rate spread of 135 basis points, which will refrain monetary policy committee from interest rate hike at least till June next year.”

PBS data further showed that food prices, which recorded rise in November over the same month a year ago, included onion (187.02pc), tomatoes (107.51pc), rice (14.10pc), eggs (12.94pc), betel leaves and nuts (11.34pc), tea (10.73pc), meat (7.2pc), honey (7.24pc), readymade food (6.38pc) and fresh fruits (6.27pc).

In November, prices of pulse gram fell 28.40 percent year-on-year, followed by pulse mash (27.79pc), sugar (25.60pc), pulse moong (20.28pc), pulse masoor (20.27pc), besan (19.13pc) and chicken (11.73pc).

Non-food items that witnessed increase in November over the same month a year earlier included drugs and medicines (15pc), education (12.4pc), motor fuel (11.81pc), kerosene oil (10.23pc), tailoring (7.89pc), medical tests (7.14pc), construction wage rates (6.97pc), personal equipment (6.77pc), cleaning and laundry (6.58pc) and house rent (6.49pc).

Food items that registered increase in November over October included eggs (30.09pc), potatoes (5.66pc), betel leaves and nuts (4.75pc), tomatoes (3.61pc), wheat flour (1.99pc), chicken (1.95pc), fish (1.64pc), wheat (1.63pc), dry fruits (1.58pc), honey (1.39pc) and bakery and confectionary (1.19pc).

Prices of pulse mash decreased 5.26 percent month-on-month in November, followed by fresh fruits (4.76pc), pulse moong (4.19pc), onion (2.81pc), pulse masoor (2.25pc), pulse gram (2.06pc), sugar (1.99pc) and gur (1.55pc).

Non-food items that recorded a rise in November over October included kerosene oil (4.71pc), motor fuel (2.22pc), personal equipment (2.18pc), woolen readymade garments (1.53pc), blades (1.52pc), education (1.39pc), medical tests (1.19pc), furniture (1.02pc) and tailoring (0.91pc).