KARACHI, June 12: The State Bank expects a price flare up in the coming months due to higher monetary expansion coupled with increasing energy prices after all the three price indices showed a downward trend.

The SBP’s third quarter report (January-March 2001-2002), of the State Bank attributed the lower annual average rate of inflation in all three indices (CPI, WPI and SPI) to improved agriculture output, continued appreciation of the rupee and decline in unit values of some imported items.

Although the monetary growth is significantly higher during this period, its impact is yet to be felt on commodity prices, says the Central Bank’s report, released on Wednesday.

The annualized inflation rate based on Consumer Price Index (CPI) and Sensitive Price Index (SPI) during July-March 2001-2002 is lower than the marginal increase during March 2002 (and the third quarter of the current fiscal year). This indicates the possibility of upward pressure on these indices during coming months due to carryover effect of the increase in the prices of oil products and scaling down of subsidies on public utilities.

SBP report says that the ease in inflationary pressure during July-March 2001-2002 is more notable for Wholesale Price Index (WPI). Also the incremental rise in WPI is less than the annualized increase in three quarters largely due to falling prices of raw materials (especially raw cotton).

CPI: The food group witnessed a price increase of 2.8 per cent during the third quarter of Jan-March 2001-2002 as compared with 4 per cent in the same period of last year. The lower increase in the prices of food, beverages and tobacco was due to the high- base effect (some of the items that either observed higher prices last year, either showed substantial declines or experienced stability during third quarter), improved domestic production and falling imports prices due to rupee appreciation.

Wheat prices remained stable due to comfortable supply from last year’s carryover stocks and new crop arrivals. Large inventories of sugar kept retail prices in the range of Rs20-23 per kg as compared to Rs25-27 per kg.

SBP report says that the prices of vegetable ghee/cooking oil, rice, gram and tomato recorded an increase in the third quarter. Withdrawal of concession prices after Ramazan and higher palm oil prices in world markets were attributed to ghee price hike. A marginal increase in price of rice was recorded due to shortfall in domestic production.

The price of non-food group rose by 4.3 per cent in the third quarter compared with 4.9 per cent recorded in the same period of last year as the non-food group is slightly larger in terms of weight (55.87 per cent).

Prices of diesel and petrol recorded 21.9 and 12 per cent increase in the third quarter, the Central Bank report adds.

The increase in apparel, textile and footwear by 3.4 per cent was on account of the high demand both due to season factor (Eid- ul-Azha) and improvement in export orders.

WPI: The food group recorded lower increase of 2.3 per cent compared with 3.7 per cent observed in the same period of last year. Price of wheat, wheat flour, sugar and gur were lower in the wholesale market because of the large carryover stocks as well as fresh arrivals. Items like rice, vegetable ghee, gram, tomato, potato and onion recorded an increase.