Consumer inflation clocks in at 11.04 pc in Oct

KARACHI: Annual consumer inflation accelerated to 11.04 percent in October from 6.5 percent in the corresponding month a year earlier as food prices and costs of housing, electricity and transportation continued to increase during the month, official data showed on Wednesday.

Pakistan Bureau of Statistics (PBS) said consumer price index (CPI) inflation eased from 11.4 percent year-on-year in September 2019. On month-on-month basis, consumer inflation was recorded at 1.8 percent in October 2019 compared to an increase of 0.8 percent in the previous month and 2.1 percent in October 2018.

Saad Hashmi, executive director at BMA Capital said the inflation was higher than the market expectation as food inflation remained on the higher side. The market was expecting the inflation at 10 to 10.5 percent in October.

Food inflation, which accounts for 35 percent of the basket, was recorded at 15.03 percent year-on-year in October. Hashmi, however, believes inflation to decelerate to single digit within the next six months. “If oil prices don’t increase and rupee remains stable against the US dollar, the inflation would come down to single digit,” he said.

The State Bank of Pakistan (SBP) expected consumer inflation in the range of 11 to 12 percent during the current fiscal year. The central bank was expected to adopt soft stance in the upcoming monetary policy considering the benign inflation outlook for the next one year.

“Since inflation is expected to fall at single digit in next six months, there is a likelihood of a policy rate cut,” Hashmi said. Analysts said economic slowdown warrant a cut from 13.25 percent rate to revive up growth.

“Consistent decline in large-scale manufacturing (LSM down 7.06 percent year-on-year in August), a significant reduction in cut-off yields (between 90-115 basis points) in the latest PIBs (Pakistan Investment Bond) auction and flat growth in loans to the private sector point strongly towards some respite,” analyst Mustafa Mustansir at Taurus Securities said in a report. “However, we expect the easing to be less aggressive than the tightening.” In September, the government started to include rural markets in the inflation survey with rebasing of year to 2015/16 from 2007/08. Under the old metric, consumer inflation reading came at 11.08 percent year-on-year in October.

PBS said CPI inflation rural increased by 11.3 percent on year-on-year basis in October 2019 as compared to an increase of 11.1 percent in the previous month and 5.7 percent in October 2018. On month-on-month basis, it increased by 2.2 percent in October 2019 as compared to an increase of 0.8 percent in the previous month and an increase of 2 percent in October 2018.

CPI inflation urban increased by 10.9 percent on year-on-year basis in October 2019 as compared to an increase of 11.6 percent in the previous month and 7 percent in October 2018. On month-on-month basis, it increased by 1.6 percent in October 2019 as compared to an increase of 0.7 percent in the previous month and an increase of 2.2 percent in October 2018.