ISLAMABAD: Pakistan’s annual inflation rose to 3.16 per cent in May from 2.11pc in the previous month, driven by a surge in food prices.

On a month-on-month basis, the inflation measured through the Consumer Price Index (CPI) was up by 0.8pc in May compared with April, the Pakistan Bureau of Statistics said on Monday.

The main cause of rise in inflation was increase in the prices of food products, which rose by 0.76pc. The hike was mainly seen in the prices of perishable products.

Read: Pakistan inflation rate falls to 2.11 per cent in April on year

A nominal increase of 0.02pc was seen in the prices of beverages, clothes and footwear in May over the previous month. Prices of pulses and other food items are expected to go up further ahead of Ramazan.

The average annual inflation during the first 11 months (July to May) was 4.65pc, which is still at an 11-year low.

The recent increase in oil price after a period of six months may arrest further decline in transport prices this month, as statistics show an increase of 0.07pc in transport price in May over the previous month.

Core inflation — which is measured by excluding volatile food and energy prices — slowed for the eighth consecutive month to 4.9pc from 5.4pc in April. Falling inflation has also encouraged the State Bank of Pakistan (SBP) to cut its key interest rate to a 42-year low of 7pc.

According to the SBP, inflation continued with its downward trajectory in this fiscal year. The decline has been broad based as all the headline and underlying measures of inflation have recorded deceleration.

Soft international commodity prices, stability in exchange rate, contained government borrowings from the central bank, moderate aggregate demand, and SBP’s earlier conservative monetary policy stance have remained the key factors in controlling inflation this year.

Going forward, continuation of inflation at lower levels is reflected in the latest IBA-SBP survey of May 2015. However, uncertainty about international oil prices and possible adjustment in domestic energy prices are the main risks to this inflation outlook, the survey said.

In May, annual food inflation rose to 1.90pc, non-perishable food items 0.63pc and perishable items to 9.72pc.

The food items whose prices increased included tomatoes (17.57pc), pulse gram (14.89pc), besan (13.05pc), fresh vegetables (11.49pc), chicken (10.70pc), fresh fruits (9.16pc), onions (7.34pc), pulse mash (5.97pc), gram whole (5.81pc), gur (3.09pc), pulse masoor (3.03pc), sugar (2.47pc), betel leaves and nuts (1.25pc) and pulse moong (1.08pc).

On the other hand, year-on-year non-food inflation was 3.3pc in May. The non-food items whose prices rose included kerosene (1.40pc) and mechanical service (1.21pc).

Average inflation measured through the Sensitive Price Index (SPI) was 1.80pc in July-May 2014-15, while Wholesale Price Index (WPI) was negative 0.14pc. Lower WPI inflation reflects less demand for domestic commodities, apparently because of low purchasing power.

The entering of manufacturing sector into a negative growth indicates deflation in the economy.

Published in Dawn, June 2nd, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play