ISLAMABAD, June 4: Inflation increased by an average of 8 per cent during 2005-06 against figures for corresponding period last year mainly because of surge in prices of food items, energy, transport and house rent.

According to the Economic Survey Report 2005-06, which was released here on Sunday, all important price pressure barometers indicated a steady deceleration in inflation, reducing pressure on consumers.

Barring any adverse shocks, it was expected that inflation would remain within the projected target of 8 per cent by end-June.

During 10 months of the current fiscal year, inflation was estimated at 8 per cent against 9.3 per cent in the same period last year. The Economic Survey pegged food inflation at 7 per cent against 12.8 per cent during the same period last year.

Non-food inflation was estimated to be at 8.8 per cent against 6.9 per cent in the same period last year. Core inflation, which excluded food and energy cost and represents fiscal, monetary, exchange rate policies, moved up and was estimated at 7.7 per cent as against 7 per cent for the same period last year.

The adverse external developments, which impacted the price level for the fiscal year under review, included a surge in international price of oil to an all time record of $75 per barrel in April this year coupled with an unprecedented rise in world prices of commodities because of extraordinary demands from fast growing economies such as China and India.

The survey says the rising income level had strengthened domestic demand and put forward pressure on prices of essential commodities. Supply side pressure emanated from a variety of factors prominent among those are increase in wheat support price for three years in a row, wheat shortage because of below target production, mismanagement in wheat operation in one of the wheat-deficit province, inter-provincial ban on movement of wheat resulting in spikes in prices.