Lahore: The country’s Consumer Price Index (CPI) may escalate to 3.75 percent in September compared to 3.4pc last month, primarily owing to seasonal increase in food inflation being attributed to Eid season earlier this month.
Talking to Pakistan Today, analysts believe seasonal price increase in perishable food items following Eid season will likely be the key driver of current month’s CPI. “We expect food inflation to hang around at 1.1 percent on month on basis compared to an average of 0.4 percent in last two-months,’ experts said.
The experts said as vegetables prices surged during major part of this month, weekly price trends suggest prices of pulses, sugar, tea, chicken have reduced. Considering this as the last session of monsoon season, they believe that risk of any major floods is not around, which leads them to anticipate easing up of sensitive food item prices in second quarter of fiscal 2017-18 following the setting in of minor crops harvest season, which would be reflected in December. “Last five years data indicates price deflation in food stuff are mostly influenced by perishable items” the experts believe.
Pointing last month where core inflation took slight dip to 5.5 percent compared to 5.6 percent in July, the experts said it remained at the same average level as the last 6-months of 5.45 percent, which is likely to stay in coming months as a result of rising aggregate demand. That has resulted in improved pricing power in many sectors, which is clearly reflected in rising prices of construction-related inputs of textile and auto sectors.
Policy makers are likely to remain cautious of core inflation that would escort slippage in fiscal deficit targets (vis a vis last year’s big miss in fiscal deficit at 5.8 percent of GDP against revised target of 4.2 percent), and exchange rate risk, though manageable inflation levels will likely keep policy rate at current levels at least till late fiscal year.
They were of the view that last month’s banner inflation went down unexpectedly by 3.7 percent primarily owing to lower than anticipated food inflation. CPI averaged at 3.16 percent compared to 3.84 percent in same period last year. Overall, they believe the CPI level seen in some monthly readings will be near 5 percent, is unlikely to be repeated by passive international oil prices and limited food inflation.
Reduction in POL prices last month supported transport group inflation which slipped to 2.7 percent against 3.2 percent in July. Textile and Housing group stayed flat as compared of 3.9percent and 5.3 percent of July, respectively.
Recent heavy rains in Sindh have reportedly affected standing cotton and onion crops and 10-15 percent loss has been reported which has increased prices; however, there is low probability of any further major damage to crops in the last span of monsoon.
