Inflation creeps up to 7.3pc in FY19, still in govt’s target range

ISLAMABAD: Consumer price index (CPI) inflation clocked in at 7.34 percent in the fiscal year 2018/19, ran comfortably below the government’s target of 7.5 percent, official data showed on Tuesday, indicating that the central bank is likely to change its monetary policy stance at least for short-term to neutral from calibrated tightening.

Annual inflation in the fiscal year 2017/18 was recorded at 3.92 percent and 4.16 percent in fiscal 2016/17, the Pakistan Bureau of Statistics (PBS) reported. Economists said a neutral stance would bode well for the government, which wants to boost lending and lift growth as it faces a wider fiscal deficit and larger borrowing.

“In the environment of higher discount rate, businesses remain depressed and give less output, as their expansion becomes difficult due to costlier bank borrowing,” an economist said. “The slowing aggregate demands because of tight monetary policy also affect them badly.”

PBS data showed that CPI inflation was remained at 8.9 percent year-on-year in June 2019 against 5.21 percent recorded during the corresponding month of last year. Inflation in June, however, was slower than May’s inflation of 9.11 percent. During this year, the highest inflation was recorded in March 2019 at 9.42 percent, while the lowest number was 5.12 percent in September 2018.

Food and non-alcoholic beverages that occupy more than one-third of the CPI basket, stood at 7.52 percent in June 2019 against 3.23 in June 2018 and 8.58 percent in the previous month of (May 2019).

Monthly CPI bulletin revealed that besides other commodities, alcoholic beverages and tobacco prices increased 22.09 percent, transportation charges went up 14.96 percent, utilities (housing, water, electricity, gas and fuel) increased 9.99 percent, furnishings and household equipment maintenance went up 9.26 percent, and communication cost increased 8.82 percent over the same month last fiscal.

Besides, health charges went up 8.60 percent, recreation and culture expenses increased 7.12 percent, restaurants and hotel charges went up 6.51 percent, clothing and footwear prices increased 6.21 percent, while education charges were costlier by 5.45 percent over the same month last year.

The PPS data further says that CPI inflation on month-on-month basis increased by 0.4 percent in June 2019, as compared to an increase of 0.8 percent in May 2019 and an increase of 0.6 percent in June 2018.

During the month under review, core inflation, excluding food and energy costs remained the same as last month at 7.2 percent, while it increased very slightly from 7.1 percent in June 2018.

The other indicator of inflation ie the general Wholesale Price Index (WPI) during the month under review increased by 12.7 percent, as compared to an increase of 14 percent a month earlier, and an increase of 7.6 percent in June 2018.

In a span of one month, potato prices increased by 17.3 percent, cigarettes 7.75 percent, moong pulse 5.05 percent, gur 4.25 percent, mash pulse 3.7 percent, onions three percent, wheat flour 2.2 percent, and wheat 2.15 percent over the previous month.

Besides, motor fuel prices went up 3.40 percent, personnel equipments 2.66 percent, construction input items 1.57 percent, household servant 1.4 percent, kerosene oil 0.9 percent, cosmetics 0.56 percent, and construction wage rate increased by 0.52 percent.

However, in food items, fresh fruit prices decreased 12.33 percent, tomatoes 9.20 percent, chicken 5.22 percent, fresh vegetables 2.65 percent, and fish prices decreased by 1.40 percent over the previous month.

Year-on-year, onion prices increased by 72.13 percent, moong pulse 42.67 percent, sugar 33.50 percent, gur 27.85 percent, cigarettes 23.64 percent, fresh vegetables 18.05 percent, spices 16.6 percent, mash pulse (washed) 16.4 percent, potatoes 13.4 percent, meat 12.77 percent, gram pulse 12.47 percent, and price of beans increased 10.67 percent over the same month of last year.

However, chicken price reduced by 12 percent, tomatoes 6.4 percent and egg prices went down 5.6 percent over June 2018.