The Consumer Price Index (CPI) inflation is expected to stay at 7.27 per cent Year-on-Year in Sep-14.
Last year, the same was recorded at 7.39 per cent during September and 7 per cent in August.
“On monthly basis, an easing trend is likely to be witnessed as CPI is expected to shrink by minimal 0.03%MoM in Sep-14 v/s 0.33%MoM in Aug-14,” said InvestCap analysts.
On moving average basis CPI is anticipated to remain below 8% staying at 7.38% for Jul-Sep-14, they added. “Such low level of CPI is mainly due to decline in Food and Non-alcoholic Beverages Segment by 0.31%MoM,” said the analysts.
In this segment, Fresh Fruit Index (contributing 1.9% weights in total index) is expected to fall massively by 11%MoM due to end of Ramazan.
Similarly, chicken prices are also estimated to post a decline of 17%MoM amid upcoming Eidul Azha event therefore pulling down the demand of chicken going forward.
In addition, the analysts said, a sharp decline in potatoes and onion prices by 4.4%MoM and 3.1%MoM with weight of 0.4% and 0.5% respectively is expected to be yet another major factor behind the decline in CPI during the month.
Moreover, in non-food items decline in POL product prices would be the major factor behind the drop in CPI during Sep-14.
However, some of the major items preventing CPI from further decline are tomatoes, wheat flour (containing the highest weight in the Food basket of 4.2%), eggs, sugar and gurr in food items.
While in non-food items clothing, household items and other personal goods would be the major items which could post a rise in their prices.
Giving their outlook, the analysts said that a low pace in inflation was anticipated to continue going forward on the back of falling international oil prices and stable PKR against dollar.
“We expect in near term vegetables and fruit prices are expected to fuel up the food inflation amid floods in Punjab,” they said.
Moreover, delay in realising the foreign inflows in near future could exert pressure on PKR therefore depreciation in PKR would increase the prices of imported items.
The declining capacity utilization of different industries on acute power outages is creating further pressure on supply side which may result in either increase in imports or increase in the prices of locally manufactured products.
“Although, we expect 8/8.25% inflation during FY15 but sudden movement in above mentioned factors could affect the estimated CPI forecast,” said the market observers.
