July's CPI records 12-year low of 1.8pc

The Pak Banker - - COMPANIES/BOSS - Staff Re­porter

The head­line Con­sumer Price In­dex (CPI) con­tin­ued to main­tain its level at lower side as it stand at 1.8 per­cent in July, which is a record level of 12-year old due to con­trolled in­fla­tion prices of petroleum prod­uct and food items.

Ac­cord­ing to Pak­istan Bureau of Sta­tis­tics (PBS), CPI in­fla­tion clocked in at a 12-year low of 1.8 per­cent in July 2015 com­pared to 3.2 per­cent in Jun 2015.

CPI in­fla­tion in­creased by 0.4% ver­sus an in­crease of 0.6% in June 2015 and an in­crease of 1.7% in July 2014 on month-on-month ba­sis (MoM).

How­ever, in­fla­tion on food, which is the ma­jor com­po­nent of CPI with a weight of 35%, de­clined by 0.3% YoY in July 2015 as against an in­crease of 2.4% in June 2015 de­spite of Ramadan. The de­cline in food in­fla­tion is at­trib­uted to drop in prices of per­ish­able food items ow­ing to im­proved sup­ply sit­u­a­tion from do­mes­tic and in­ter­na­tional mar­kets.

PBS data stated that the per­ish­able food prices de­clined by 13% YoY in July 2015 with ma­jor drop seen in prices of pota­toes down by 59%, oil/ghee down by 11% and rice down by 10%.

Be­sides, lower food prices, trans­port in­dex (weight of 7% in CPI) also re­ported a de­cline of 10% YoY in July 2015 as against 9% fall dur­ing the pre­vi­ous month.

Core in­fla­tion in Jul 2015 clocked in at 4.1% as com­pared to 4.6% in Jun 2015, show­ing per­sis­tent de­cline since Fe­bru­ary 2015. The con­sis­tent de­cline in core in­fla­tion also in­di­cated that over­all in­fla­tion­ary trend has been on the lower side re­cently.

Fur­ther­more, hous­ing, wa­ter and fuel seg­ment with in­dex of 29% in CPI in­creased by 4.4% in Jul 2015 ver­sus 4.9% in Jun 2014. On MoM ba­sis, in­dex in­creased by 0.9% dur­ing the month led by quar­terly re­vi­sion in house rent in­dex.

Real in­ter­est rates have now in­creased to 5.2% in Jul 2015 as against 3.8% dur­ing the pre­vi­ous month and 1H2015 av­er­age of 4.8%, due to lower in­fla­tion.

An­a­lysts said that in­fla­tion in FY16 is an­tic­i­pated to grad­u­ally pick up led by ex­pected hike in energy tar­iff and an­tic­i­pated uptick in ag­gre­gate de­mand. It is an­tic­i­pated in­fla­tion to clock in at around 5.5-6.0% as com­pared to 4.5% in FY15 though fed­eral gov­ern­ment has also set in­fla­tion tar­get of 6% for FY16.

SBP lately have adopted ac­com­moda­tive mon­e­tary pol­icy slash­ing dis­count rate by 300bps in FY15. How­ever, due to ex­pected in­crease in in­fla­tion, SBP to keep dis­count rate un­changed in 2015.

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