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Inflation edges up to reach 5 per cent in May

Updated June 02, 2017

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KARACHI: The price of potatoes in May increased 19.88pc while that of onions decreased 10.67pc on an annual basis. With 37.47pc weight in the CPI, the food group showed an annual increase of 4.9pc last month.—White Star
KARACHI: The price of potatoes in May increased 19.88pc while that of onions decreased 10.67pc on an annual basis. With 37.47pc weight in the CPI, the food group showed an annual increase of 4.9pc last month.—White Star

ISLAMABAD: Inflation remained five per cent in May compared to 4.8pc in the preceding month because of an increase in the prices of petroleum and perishable products.

Inflation rose 0.2pc month-on-month in May compared to a 1.3pc increase in the previous month and 0.2pc in May 2016, according to figures released by the Pakistan Bureau of Statistics (PBS) on Thursday.

Main inflation is measured through the Consumer Price Index (CPI), which tracks prices of around 480 commodities every month in urban centres across the country.

Read more: Exasperated consumers leverage technology in attempt to control runaway fruit prices

The government believes the uptick in inflation is due to rising international commodity and oil prices along with an increase in domestic demand following a pickup in economic activities.

Average annual inflation in the first 11 months of 2016-17 was 4.18pc against 2.82pc a year ago. The trend suggests inflation for 2016-17 will remain below the target. The target for annual inflation is 6pc. In the preceding fiscal year, average annual inflation was recorded at 2.86pc.

The food group with 37.47pc weight in the CPI showed an increase of 4.9pc in May.

On a month-on-month basis, food inflation was 0.2pc in May due to an increase of 18.10pc and 2.40pc in the prices of perishable and non-perishable products, respectively.

The price of potatoes in May increased 19.88pc, fresh fruits 10.12pc, pulse gram 2.35pc, rice 2.01pc, beverages 1.8pc, gram whole 1.76pc and pulse mash 1.24pc.

Also see: Up to 300pc increase in prices of fruit, vegetables

Core inflation, which excludes volatile food and energy prices, was recorded at 5.5pc in May, up 0.2pc from the preceding month. The gradual build-up of domestic demand is evident in rising core inflation, which covers the price movement of 43 items.

Core inflation has remained subdued since November 2015 because of a tighter monetary policy.

The State Bank of Pakistan (SBP) uses core inflation while formulating its monetary policy. Thus, the effect of monetary policy on prices reflects on core inflation with a lag, making it a good predictor of the future CPI.

Non-food inflation was 5.1pc in May, showing an increase of 0.2pc over the preceding month. Crude oil prices increased 17pc in the last 11 months. However, a partial impact of this increase was passed on to end-consumers in the country.

Education and health indices rose 11.17pc and 13.46pc, respectively, in May on an annual basis. The index of clothing and footwear rose 3.68pc and that of housing, water, electricity, gas and other fuels rose 5.12pc.

Meanwhile, the Sensitive Price Index edged up 1.58pc and the Whole­sale Price Index rose 4.11pc in May.

Published in Dawn, June 2nd, 2017