Consumer inflation decelerates to 10.9pc in May

ISLAMABAD: Annual consumer inflation decelerated to 10.9 percent in May compared to 11.1 percent in the previous month as fuel, electricity and food prices were seen declining.

Pakistan Bureau of Statistics (PBS) data on Tuesday showed that consumer price index (CPI) inflation general was still more than 8.2 percent in May 2020. CPI inflation increased 0.1 percent month-on-month in May compared to an increase of 1 percent in the previous month and a increase of 0.3 percent in May 2020.

Analyst Fahad Rauf at Ismail Iqbal Securities said fall in electricity prices due to fuel price adjustment restricted CPI growth.

“Core inflation continues to remain rangebound, clocking at 7.1 percent versus 7.3 percent in April,” Rauf said. The central bank left the interest unchanged at 7 percent in the latest monetary policy for the fifth time in last 10 months.

The marginal increase month-on-month was primarily driven from 0.67 percent and 0.29 percent rise in foods and clothing and footwear index predominantly due to Ramazan and EID season, said analyst Noman Ahmed at Insight Securities.

“Assuming the latest sensitive price indicator (SPI), CPI of June is expected to remain 10.5 percent year-on-year,” Ahmed said.

In July-May, consumer inflation was recorded at 8.83 percent compared to 11 percent in the corresponding period a year earlier.

Rauf said recent SPI data indicated that food prices have started to come down after Eid, which is a positive development. Energy tariffs and petroleum prices are stable. He estimated June inflation at 10.6 percent and average 9 percent for FY2021. “If the energy tariffs are kept stable, inflation would come down to single digit from July.”

While the government was expecting May inflation between 9 and 9.8 percent, it said with monitoring of smooth functioning of markets in essential products and absence of any new supply shocks inflation is expected to continue to decelerate in the coming months. In recent months, international oil price and food price dynamics have decelerated somewhat and the rupee has strengthened against the US dollar. “Furthermore, following recent government interventions to improve the functioning of domestic food markets and the assuring of sufficient supply to some of these markets, no significant new price impulses are expected to happen,” the ministry of finance said in a monthly bulletin.

CPI inflation urban increased by 10.8 percent on year-on-year basis in May 2021 as compared to an increase of 11 percent in the previous month and 7.3 percent in May 2020. On month-on-month basis, it increased by 0.2 percent in May 2021 as compared to an increase of 1.3 percent in the previous month and an increase of 0.3 percent in May 2020. CPI inflation rural increased by 10.9 percent on year-on-year basis in May 2021 as compared to an increase of 11.3 percent in the previous month and 9.7 percent in May 2020. On month-on-month basis, it decreased by 0.03 percent in May 2021 as compared to an increase of 0.6 percent in the previous month and an increase of 0.3 percent in May 2020.