CPI inflation climbs to almost five years high of 9.11pc in May

KARACHI: Consumer inflation (CPI) bounced back to almost five years high of 9.11 percent year-on-year in May, partly reflecting a deep slump in the rupee, on higher energy and food prices, while a steeper pace of price increase ahead following IMF prescribed reforms is expected to spur more interest rate hikes in the economy with subdued growth outlook.

Pakistan Bureau of Statistics (PBS) data on Monday showed that the CPI stood at 0.78 percent in May over April. Annual inflation in April eased to 8.82 percent from five years high of 9.41 percent in March.

Consumer price inflation, however, started ratcheting up in May as prices of foods – that has one thirds weight in the CPI basket – increased 8.58 percent year-on-year during the month. Prices of perishable food items rose 23.99 percent year-on-year in May, while prices of non-perishable food items increased 5.97 percent year-on-year. Prices of housing, water, electricity, gas and other fuels – which hold the second biggest weight in the CPI basket – increased 9.96 percent in May over the corresponding month a year earlier.

In July-May, consumer inflation clocked in at 7.19 percent over the same period a year earlier. Prices of foods and housing, water, electricity, gas and other fuels also increased 3.84 and 9.09 percent year-on-year, respectively. The July-May number is above the government’s target of six percent for the current 2018/19 fiscal year ending on June 30, 2019.

The State Bank of Pakistan (SBP) forecast CPI in the range of 6.5 to 7.5 percent for FY2019, with policymakers flagging risks of higher oil prices and rupee devaluation. The SBP last month pushed its interest rates up by 150 basis points to 12.25 percent for the two months monetary policy announcement in order to contain inflationary pressure. Rupee has lost more than 35 percent against the US dollar since January 2018.

In May, prices of gas saw the highest 85.31 percent year-on-year increase, followed by onion (77.52pc), cabbage (74.87pc), watermelon (55.73pc), bus fare (51.16pc), garlic (49.99pc), tomatoes (46.11pc), lemon (43.46pc), bottlegourd (34.83pc), pulse moong (33.65pc), newspaper (33.33pc), mango (28.99pc), compressed natural gas (28.23pc), tuition fees (27.73pc), sugar (26.53pc), high speed diesel (23.86pc), petrol (23.63pc), gold (20.07pc), lady finger (15.09pc), mutton (12.04pc), pulse gram (11.43pc), apple (11.20pc), bananas (10.82pc), electricity (8.48pc), wheat (7.40pc), dates (7.32pc) and house rent (6.15pc).

Items that witnessed decrease in May over the corresponding month a year earlier included betel nuts (35.55pc), gram whole (12.76pc), eggs farm (10.52pc) and aloo bukhara (4.79pc).

In May, prices of lemon increased 95.30 percent over April, followed by cabbage (75.23pc), onion (27.18pc), potatoes (25.80pc), bananas (20.91pc), carrot (15.56pc), muskmelon (12.43pc), garlic (10.46pc), petrol (6.46pc), apple (9.56pc), chicken (9.90pc), pulse mash (washed) (5.93pc), pulse moong (5.46pc), ice (4.80pc), kerosene oil (3.73pc), sugar (3.43pc), dates (3.35pc), toilet soap (2.23pc), tailoring (2.19pc), mutton (1.60pc), and compressed natural gas (1.35pc).

Items that witnessed decline in prices in May over April included tinda (47.88pc), watermelon (45.27pc), tomatoes (32.86pc), chillies green (17.27pc), cucumber (9.42pc), spinach (9.04pc), cement local (6.79pc), chicken (5.33pc), silver (2.68pc), gold (2.22pc), gram whole (1.92pc), eggs farm (1.09pc), wheat (0.85pc), gram whole (0.50pc), cement blocks (0.26pc) and besan (0.20pc).

In May, core inflation (non-food, non-energy) was recorded at 7.2 percent over the corresponding month a year ago. Core inflation was 7 percent year-on-year in May 2018, according to the PBS.