Rising food prices push inflation to five-month high in December

KARACHI: Pakistan’s consumer inflation jumped to its highest level since July, propelled by the rising cost of food as the government is seen unwilling to pass on the benefits of a drop in oil prices to tame price hike, analysts said on Friday. 

Monthly inflation edged up 3.2 percent year-on in December, official figures said. The Pakistan Bureau of Statistics (PBS) data showed that consumer price index (CPI) rose 3.19 percent in December last year over the same month a year earlier. 

December inflation figures are unlikely to influence the central bank to increase interest rates, analysts said, noting the main priority is likely to promote growth.

Analysts said the central bank may leave rates unchanged in its policy review meeting later this month 

“The main driver of inflation is food price rises, so there are no chances of any rate hike from the central bank in the near future,” an analyst said.

Consumer inflation in Pakistan has slowed sharply in recent months on a plunge in oil prices.

Analyst Saad Hashemy at Topline Securities said the uptick in December’s inflation was due to low base effect, “however, it was still significantly below expectations.” 

“We now anticipate inflation to reach around 5.5 percent in March 2016 after which it may come down to 4-4.5 percent by June 2016, resulting in 3.5-4.0 percent for the 2015/16 fiscal year.” 

The State Bank of Pakistan forecast inflation at 4.5-5.0 percent for the current fiscal year, while the government’s target is eight percent.

“As long as inflation remains around 5 percent, we expect SBP to maintain its current monetary policy stance,” Hashemy said.

Prices of food and non-alcoholic beverages, which have the highest 35 percent weight in the CPI basket, increased 1.44 percent in December 2015 over December 2014.

Perishable food items became more expensive within one year as their prices shot up 2.81 percent last month.

The whopping year-on rise was registered in prices of onion (112.29 percent), followed by pulse gram (56.75pc), besan (52.16pc), pulse mash (48.09pc), tea (29.70pc), tomatoes (26.13pc) and gram whole (23.88pc).

However, prices of potatoes fell 25.06pc, rice (17.45pc), cooking oil (15.69pc), vegetable ghee (11.37pc) and eggs (8.97pc) in December as against the similar month in the preceding year.

The PBS data showed that the cost of housing, water, electricity, gas and fuels escalated year-on 4.97 percent in December. Health services got dearer by 2.56 percent. Education fees climbed 8.78 percent in December 2015 over a year earlier. 

Transport fares, however, dropped 4.04 percent year-on-year, it said.

The data further showed that the CPI of December 2015 decreased 0.57 percent over November 2015.

Prices of tomatoes dropped 27.42pc month-on-month, followed by vegetables (23.92pc), onions (16.55pc), potatoes (15.42pc), sugar (5.08pc), gur (4.60pc), fresh fruits (3.84pc) and rice (1.07pc).

Prices of pulse mash, however, increased 6.08pc in December over November, eggs (3.74pc), chicken (2.91pc), tea (2.16pc), wheat (1.91pc), gram whole (1.90pc), dry fruits (1.44pc) and besan (1.32pc).

Increase in prices of non-food and non-energy items jacked up core inflation, which was up 0.2 percent month-on-month. 

“Rise in core inflation shows that inflationary pressures will continue to persist,” Hashemy said.

Wholesale price index (WPI) inflation, on YoY basis, decreased by 0.4pc in December 2015 as compared to a drop of 1.7pc a month earlier and a fall of 0.9pc in December 2014.  

WPI inflation, on MoM basis, dipped 0.7pc in December 2015 as compared to increase of 0.01pc a month earlier and a drop of 1.9pc in December 2014.

The PBS recorded 2.08 percent CPI inflation for the July-December period of the 2015/16 fiscal year as compared to 6.08 percent in the corresponding period a year ago.