KARACHI: The Consumer Price Index (CPI) inflation general increased by 3.4% on year-on-year basis in August 2017 as compared to an increase of 2.9% in the previous month and 3.6% in August 2016.
On month-on-month basis, it increased by 0.2% in August 2017 as compared to an increase of 0.3% in the previous month and a decrease of 0.3% in August 2016.
Core inflation measured by non-food non-energy CPI (Core NFNE) increased by 5.5% on (YoY) basis in August 2017 as compared to an increase of 5.6% in the previous month and 4.6% in August 2016. On (MoM) basis, it increased by 0.1% in August 2017 as compared to increase of 0.7% in previous month, and an increase of 0.2% in corresponding month of last year i.e. August 2016.
Food prices remained under control with the Food index witnessing a meager increase of 0.43% MoM/2.25%YoY. Other higher weightage headings of the CPI Index witnessed an escalation on a YoY basis according to the following schedule: Health rose by 12.47% and Education by 10.85%.
“We expect FY18 inflation target in the range of 4-4.2%, below SBP’s target range of 4.5-5.5% due to low inflationary environment, and oil prices weighed down by rising inventories of non-OPEC countries”, said Shajar Research’s analyst Naima Ali.
Ms Ali foresees a delay in rate hike of 25-50bps by second half of 2017 where this upsurge might further be delayed beyond second half 2017 due to upcoming elections in 2018.
Exchange rate volatility could deepen in the wake of US threatening to cut aid to Pakistan amid dwindling current account deficit (?210%YoY in Jul’17) and depleting FX reserves (reached a warning level of ~3months of import cover). Subsequently, this could feed into inflationary pressure and thereby lead to interest rate reversal, she added.
Core inflation, measured by 20% weighted trimmed mean CPI (Core Trimmed) increased by 4.2% on (YoY) basis in August 2017 as compared to 4.0% in the previous month and by 3.5% in August 2016.
On (MoM) basis, it increased by 0.1% in August 2017 as compared to an increase of 0.4% in the previous month and an increase of 0.1% in corresponding month of last year i.e. August 2016.
Sensitive Price Index (SPI) inflation on YoY decreased by 0.1% in August 2017 as compared to a decrease of 0.4% a month earlier and an increase of 2.2% in August 2016. On MoM basis, it increased by 0.5% in August 2017 as compared to a decrease of 0.5% a month earlier and an increase of 0.2% in August 2016.
Wholesale Price Index (WPI) inflation on YoY basis increased by 1.0% in August 2017 as compared to an increase of 0.7% a month earlier and an increase of 3.5% in August 2016. WPI inflation on MoM basis increased by 0.3% in August 2017 as compared to a decrease of 0.2% a month earlier and an increase of 0.0% in corresponding month of last year i.e. August 2016.
