ISLAMABAD, June 21: Average inflation measured by the Consumer Price Index (CPI) resurged in May and stood at 7.1 per cent year-on-year (YoY) as compared with 6.2 per cent in April 2006, thus hitting the lowest income group.
The average inflation during the July-May period of the current fiscal year stood at 7.9 per cent, which is significantly higher than 5.6 per cent inflation witnessed during the same period past five years.
Similarly, monthly inflation at 0.5 per cent in May 2006 was also higher than deflation observed in May 2005 as well as in the same month past five years, according to the State Bank of Pakistan’s monthly publication titled `Inflation Monitor’ released on Wednesday.
The report also observed resurgence in other two measures of inflation -– the Wholesale Price Index and the Sensitive Price Index. Although both food and non-food inflation increased during the month, the food group remained the key contributor to the overall inflation.
The report says in contrast to the previous months, the lowest income group recorded above average inflation in May 2006. Since the current wave of inflation was mainly due to the food group and food has a relatively higher weight in the consumption basket of the low income segment of population, the incidence of inflation was higher as compared to those of other income groups during the month.
Food inflation increased to 5.6 per cent in May 2006, up from 3.6 per cent in April 2006. The reasons for this increase pointed out were mainly due to a weak base along with significant increase in prices of a number of important items, including milk, meat, sugar, potatoes, cold drinks, and pulses.
Price movements of individual items in the food group show that YoY rise in prices of wheat and its products, pulses, besan, milk, meat, and sugar overshadowed the impact of the YoY decline in prices of vegetable ghee, cooking oil, poultry, onion, and tomatoes, along with a subdued inflation in number of other items.
Moreover, wheat prices, which have been showing YoY deflation since October 2005, increased by about one per cent in May 2006, over the corresponding month last year. However, the wheat prices are still lower than those in the last six months of the current fiscal year. The average price of pulses also recorded more than 60 per cent increase, over May 2005. Price of sugar, though slightly lower as compared with the last month, is still 40 per cent higher than that during May 2005.
Other commodities showing double digit inflation are milk, meat, cold drinks, ice-cream, potatoes and bananas. In terms of percentage contribution to food inflation, sugar was the highest contributor during May 2006, followed by milk, beef and grams.
Non-food inflation rose to 8.2 per cent during May 2006 as compared to eight per cent recorded in April 2006 as well as in the corresponding month last year. The increase in this group during the month under review was mainly contributed by higher inflation in fuel and lighting, furniture and equipments, cleaning, laundry and personal appearance and education.
The increase in fuel and lighting resulted primarily due to significant increase in gas cylinder prices; higher prices of air-conditioners and fans caused rise in household furniture and equipment sub-group; record high gold and silver prices pushed up inflation in cleaning, laundering and personal appearance; and higher inflation in education was the result of an increase in university fees.
Core inflation (non-food non-energy) also witnessed an increase of 6.6 per cent in May 2006, after a continuous decline for the last several months. The increase in core inflation was mainly due to second round effect of the earlier increase in oil prices which has been reflected in the rising transportation cost and consequently in general price level.
