Consumer inflation hits four-year high of 5.21 percent in June

KARACHI: Annual consumer inflation spiked to nearly four years high of 5.21 percent in June as food and fuel prices tracked up during the month, official data showed on Wednesday.

Pakistan Bureau of Statistics (PBS) measured consumer price inflation at 4.2 percent year-on-year in May and 3.9 percent in June 2017. It recorded consumer price inflation at five percent in May 2017. On month-on-month basis, consumer price inflation increased 0.6 percent in June as compared to an increase of 0.5 percent in the previous month and decrease of 0.4 percent in June 2017.

The annual consumer inflation was in line with the market expectation.

Adnan Sheikh, assistant vice president at Pakistan Kuwait Investment Company said July inflation number would rather come between six to seven percent mainly because of surge in prices of petroleum products.

“But, the inflation can be tamed if the government manages to contain consumption of fuels,” Sheikh said, referring to low oil sales in June. Overall, sales of petroleum products dropped 12 percent in June over the same month a year ago.

Food and fuel prices had the highest impact of 1.49 percent and 1.2 percent on the consumer inflation in June. Prices of housing, water, electricity, gas and fuels rose 5.55 percent in June over the corresponding month a year earlier. Food prices increased 3.23 percent year-on-year in the last month.

Education and transport costs also surged 13.1 percent and 10.7 percent in June over the same month a year ago.

Average consumer price inflation for the July-June period of 2017/18 stood at 3.92 percent as compared to 4.16 percent in 2016/17 and 2.86 percent in 2015/16. Inflation for FY2018 is much below the annual target of six percent set by the government.

In June, food items that saw increase in prices over the same month a year earlier included betel leaves and nuts (190.86pc), chicken (26.20pc), tomatoes (16.77pc), onion (14.18pc), dry fruits (10.32pc), meat (9.45pc), rice (8.83pc), sweat meat (7.84pc), spices (5.98pc), condiments (5.86pc), jam tomato ketchup and pickles (5.51pc), readymade food (5.45pc), fish (5.03pc), tea (4.90pc) and milk products (4.87pc).

Prices of pulse mash decreased 26.57 percent in June over the corresponding month a year earlier, followed by potatoes (25.61pc), pulse masoor (13.02pc), pulse gram (12.58pc), pulse moong (12.12pc), besan (8.65pc), gur (6.42pc), sugar (6.35pc), gram whole (6.08pc), eggs (1.82pc) and fresh vegetables (1.69pc).

Non-food items that saw rise in prices in June over the same month a year ago included kerosene oil (34.37pc), motor fuel (17.30pc), education (13.09pc), newspapers (12.02pc), construction wage rates (10.48pc), water supply (10.21pc), personal equipment (9.32pc), postal services (8.90pc), medical tests (8.74pc), cosmetics (8.60pc), stationary (8.51pc), construction items (8.51pc), doctor fee (8.35pc), tailoring (8.24pc), transport services (8.17pc), furniture (7.98pc), cleaning and laundry (7.49pc), hosiery (7.42pc), footwear (7.36pc) and household servant (7.15pc).

PBS data further showed that core inflation measured by non-food non-energy CPI continued to increase in June, clocking in at 7.1 percent year-on-year as compared to an increase of seven percent in May and 5.5 percent in June 2017.

Analysts said increase in core inflation is paving the way for further rise in the central bank’s policy rates. The State Bank of Pakistan increased its policy rate twice by a cumulative 75 basis points since mid-January to cool domestic demand.

Analysts are expecting another 50 basis points increase in interest rate in the monetary policy scheduled end of the current month. The State Bank of Pakistan raised its key policy rate by 50 basis points to 6.5 percent in May.

The tight monetary policy stance may hurt growth prospect. The World Bank projected growth at five percent for the current fiscal year of 2018/19 as compared to 5.8 percent in the last fiscal year of 2017/18.