According to Pakistan Bureau of Statistics (PBS), the Consumer Price Index (CPI) inflation during June stood at 5.85 percent which the market analysts said is surprisingly far below the market consensus of 7 percent.
This was compared to 5.13 percent of May.
During FY13, the CPI inflation settled at 7.36 percent compared to 11.01 percent in the same period last year.
Moreover, Core Inflation CPI (Core NFNE) reached 7.8 percent YoY in June 2013 compared to 11.4 percent in Jun 2012. On a monthly basis core inflation increased by 0.4 percent in Jun-13 as compared to 0.3 percent a month earlier and 0.7 percent in the corresponding period last year.
“The below than consensus inflation is mainly due to the partial incorporation of GST impact in the prices of Jun-13 as the impact is expected to distribute in two months (Jun-Jul), therefore the further impact of the GST can be seen in the next month (Jul-13) prices,” said InvestCap analyst Abdul Azeem.
However, the analyst said, the rise in petroleum products and CNG was incorporated after the formal government notification.
During the month in review (June), in food and non-alcoholic beverages group, the perishable items’ index reduced by 4.8 percent MoM due to decline in prices of onions -14.2 percent MoM, fresh fruits -10.1 percent MoM, fresh vegetables -4.2 percent MoM and eggs -2.62 percent MoM.
However, food, alcoholic beverages and tobacco and clothing and footwear were the major items which caused a surge in CPI for Jun-13. In non-food items, the major increased was seen in the prices of cosmetics 6.96 percent, footwear 6. 16 percent, motor fuel 2.16 percent, sewing needle and dry cell 1.76 percent, construction wage rates 1.30 percent, text books 1.23 percent, washing soap 1.20 percent, marriage hall charges and doctor (MBBS) clinic fee 1.12 percent each, blades 0.91 percent and cotton cloth by 0.87 percent.
“After the positive reply from IMF for the loan of $5 billion, it is expected that the improved foreign exchange reserves of the country would open the door for further assistance from ADB, WB and other donor agencies,” said the analyst.
Therefore, he said, a better dollar reserves position would strengthen the rupee against the dollar, bringing stability in the prices of imported items.
On the other hand, Abdul Azeem said, the IMF’s pressure on the government to reduce fiscal deficit either by improving tax revenue or by reducing power subsidy was expected to balloon up the inflation.
“Therefore, we expect a rise in CPI for FY14 to 9.0 percent to 9.50 percent as against the target of 8 percent set by PML-N government,” said he.
