July 31, 2006	Monday	Rajab 4, 1427

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ISLAMABAD, July 30: While national inflation remained within eight per cent in June 2006, cities like Islamabad, Rawalpindi and Attock witnessed double digit inflation, putting more pressure on the low earning families, an analysis of the official statistics shows.

It shows that the residents of the three cities are paying more for food items like milk, sugar, meat and pulses due to which the monthly budget of the low-salaried class has drastically affected.

The lowest income group having income upto Rs3,000 experienced the highest inflation during June 2006 reflecting the impact of higher food inflation. Except the middle income group with income range of Rs5,001-Rs12,000, all other groups witnessed above average inflation during the month.

The contribution of food group to overall inflation rose to 42 per cent in June 2006, which was considerably higher than its average contribution of 35 per cent during the earlier months.

The contribution of House Rent Index (HRI) to overall inflation declined to 24.2 per cent from an average of 30 per cent during the earlier months.

During June 2006, inflation in the prices of 10 out of the 374 items in the Consumer Price Index (CPI) basket contributed about 62 per cent to the overall inflation. Similar to the previous months, except HRI and train fare, all these items belonged to either food or energy groups of CPI.

The consumer price inflation increased to 7.6 per cent year on year (YoY) in June 2006 in the 35 urban cities, which was the national average and applied on the whole country.

City-wise breakup showed that over 10 per cent inflation was recorded in Islamabad, Rawalpindi, Attock and Kunri during the month of June 2006.

Of the 35 cities covered in the CPI, five cities — Vehari, Lahore, Bannu, Bahawalnagar and Okara — have recorded more than nine per cent inflation during the month under review.

The cities which witnessed less than eight per cent and more than seven per cent inflation included D.I. Khan, D.G. Khan, Bahawalpur, Sargodha, Multan, Gujranwala, Mirpur Khas, Shahdadpur, Jhelum, Turbat, Peshwar, Jhang, Mardan, Abbottabad, Loralai, Faisalabad, Khuzdar and Sialkot.

The cities witnessing below seven per cent inflation included Quetta, Karachi, Mianwali, Nawabshah, Hyderabad, Larkana and Sukkur.

According to the State Bank of Pakistan’s report, a detailed analysis showed that prices of some key food items declined or showed subdued inflation like wheat flour, bread, cooking oil, eggs, onion, etc., which were however offset by double digit increase in prices of pulses, maize flour, milk, meat, sugar and vegetables including potatoes, tomatoes, green chilies, etc.

Though prices of pulses were still more than 50 per cent higher in June 2006 than those in June 2005, they declined by about five per cent from previous month’s level primarily due to supply side measures by the government.

A similar is the case with sugar prices that declined by about four per cent from its previous month’s level, though still higher by more than 30 per cent than its price in corresponding month last year.

The year on year (YoY) inflation in milk and meat prices was also higher than 10 per cent, though some deceleration was witnessed when compared with earlier months.

Of the 124 items of food group included in the CPI basket, prices of 34 items witnessed YoY increase of more than 10 per cent and 27 items showed a moderate inflation of 5 to 10 per cent.

Prices of 25 commodities declined in June 2006 over the corresponding month last year; the rest of the commodities either showed YoY inflation of 0-5 percent or their prices were not quoted. In terms of percentage contribution to food inflation, fresh milk was the highest contributor during June 2006, followed by sugar, beef and gram pulse.

On the other hand, non-food inflation witnessed a decline in June 2006 due to continuous slowdown in house rent index and fall in the rate of increase in fuel and lighting and transport and communication price indices.

A frequency distribution of price changes shows that of the 250 non-food commodities included in the CPI basket, only 32 commodities witnessed double digit inflation which include shoes, firewood, gas, petrol, rickshaw and taxi fares, train and air fares, laundry services, primary school fees, some books, etc.

There were 50 commodities that showed moderate inflation in the range of 5-10 per cent; all other commodities witnessed either YoY deflation or inflation of less than five per cent.

The report says the decline in overall inflation during fiscal year was due to prudent demand management policies as well as administrative measures taken by the government to check the rise in prices of essential food items.