No let-up in inflation

Wednesday, September 02, 2009

KARACHI - Out of 112 commodities in the Consumer Price Index (CPI) food group, the prices of 74 items increased from 10 to 93 per cent, 17 items recorded 0-10 per cent increase while 18 commodities showed decline in the value in July 2009. The prices of most of the food items had started surging two to three weeks ahead of the holy month of Ramazan. One food item, coffee, witnessed 100 percent price change (YoY) in July this year. In terms of weighted contribution, seven out of top ten commodities were from CPI food group during July 2009, i.e., fresh milk, wheat flour, meat, sugar, vegetables, readymade food and tomatoes.

State Bank of Pakistan s Inflation Monitor for July 2009 points out that the weighted contribution of these seven food commodities in the overall CPI inflation was 37.6 percent with 20.4 percent weight. Within food group, just five items, i.e., wheat flour, fresh milk, meat, sugar and vegetables contributed 73.8 percent with 45.3 percent weight to YoY food inflation. CPI food inflation month-on-month (MoM) basis showed significant increase during July 2009 compared to the previous month. CPI food inflation (MoM) was 3.0pc during the month under review compared to 2.8pc during July 2008 and 1.0pc during the previous month. Detailed item-wise analysis of CPI food basket on MoM basis showed that 11 items including onion, pulse mash, eggs, potatoes, tomatoes, garlic, etc. showed double digit price change during July 2009, whereas prices of 16 items including arvi , ghee, mustard oil, chilies green, red chillies, etc. declined. Within food group, further segregation (of 40 composite food items in the CPI basket) can be made on the basis of perishable and non-perishable commodities.

Inflation (YoY) in the perishable group witnessed increase and was recorded at 26.6 percent during July 2009 compared to 22.9 percent in July 2008 and 22.8 percent during the preceding month. Prices of perishable commodities are often volatile and this is reflected in the inflation (MoM) which reached 14.7 percent during July 2009 compared to 11.3 percent in the same month last year and 3.6 percent during June 2009. Inflation (YoY) in non-perishable group declined during the month under review and reached 8.6 percent compared to 35.4 percent during the corresponding month last year and 9.0 percent in June 2009. On MoM basis inflation in non-perishable group was 1.5pc during July 2009 compared to 1.8 percent in July 2008 and 0.7pc during June 2009.Overview The current fiscal year commenced with ease in headline CPI inflation (YoY) compared to the same month of previous fiscal year. Consumer price inflation year-on-year basis was 11.2 percent during July 2009 as against 24.3 percent in July 2008 and 13.1 percent in the previous month. Significant decline was witnessed in both food and non-food group s inflation (YoY) during July 2009 as compared to the same month last year. Contrary to YoY inflation, CPI inflation (MoM) increased during July 2009 and was recorded at 1.5 percent compared to 1.0 percent in June 2009. CPI food group showed significant increase in inflation (MoM) during July 2009, whereas non-food group showed a decline of 0.7 percentage points. Ease in inflationary pressures can also be seen in both measures of core inflation, i.e., non-food non-energy (NFNE) and 20% trimmed mean during July 2009. Both NFNE and 20% trimmed mean showed decline during July 2009 as compared to the same month last year and the previous month.

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