June 30, 2019 (MLN): As the current fiscal year 2019-20 nears its end, it is necessary to review the inflation figure of the outgoing month in a timely manner in order to fairly assess the current position of the economy.
Pakistan Bureau of Statistics is scheduled to disclose Consumer Price Index (CPI) on Monday i.e. July 1, 2019. Anticipating these results, several brokerage houses have put forth their projections for the CPI figures, based on previous performance and current economic factors. The projections of these research houses regarding CPI numbers are therefore listed below:
|
CPI Forecasts for June 2019 |
||
|---|---|---|
|
Brokerage House |
Expected YoY CPI change (%) |
Expected MoM CPI change (%) |
|
Foundation Securities |
9.50% |
0.90% |
|
Next Capital |
9.38% |
0.82% |
|
Spectrum Securities Limited |
9.57% |
0.97% |
|
Insight Securities |
9.60% |
1.10% |
|
Abbasi & Co. |
9.61% |
1.03% |
|
Ismail Iqbal Securities |
9.30% |
0.70% |
|
Al Habib Capital Markets |
9.76% |
1.17% |
|
Darson Securities |
9.45% |
0.88% |
|
AKD Securities |
9.65% |
1.06% |
|
Shajar Capital |
9.59% |
1.00% |
|
Arif Habib Limited |
9.32% |
0.76% |
|
BIPL |
9.30% |
0.80% |
|
Range |
9.76% – 9.3% |
1.17% – 0.7% |
|
Mean |
9.50% |
0.93% |
|
Median |
9.54% |
0.94% |
|
Mode |
9.30% |
– |
Keeping in view the above expectations, inflation is expected to lock in within a range of 9.76% – 9.3% YoY, with an average value of 9.5% in June 2019, as compared to 4.19% YoY in the same period last year and 9.11%YoY in the month of May 2019.
On monthly basis, CPI numbers are expected to propel by around 1.17% – 0.7% YoY with an average value of 0.93% in June 2019, as compared to an increase of 0.78% in May 2019. This will push average period inflation for the FY19 close to 7.4% which is far higher than FY18 CPI of 3.91%.
These inflation prospects are subject to a number of factors including: increase in food prices and input costs, higher domestic fuel prices, volatility in international oil prices and effects of devaluation as PKR has depreciated 12.8% against USD since start of May.
As per the report by Spectrum Securities, the YoY uptick in the CPI figure is owing to increase in Food prices, Housing Index and Transport group by 8.38%YoY, 9.95%YoY and 18.48%YoY respectively.
While the upsurge in MoM CPI figure is on the back of expected increase in food sector index by 0.72% YoY where in Pulse Moong, Wheat, potatoes and sugar could be major influencers.
“Food inflation which remained benign in 1HFY19 (6MFY19 avg. 1.83%YoY vs. 3.07%YoY in 6MFY18) and helped in containing overall inflation has lately gained momentum following the increase in prices of certain perishables and rupee depreciation,” says a research report by AKD Securities.
As a result, for June 2019, the food inflation is likely to further tick up to 9.04% YoY vs. 8.58% YoY in May 2019 and 3.23% YoY in June 2018.
In view of changing macroeconomic condition, soaring inflation and decelerating GDP growth rate, a tough policy response from the State Bank is expected in the upcoming monetary policy announcement, as the economic analysts expect the CPI to stay in double digits for at least a year, considering impact of gas and electricity hike in July and government’s plans to recover circular debt, budgetary measures and PKR devaluation. Therefore, the current level policy rate seems not enough to control the forthcoming inflationary pressures.
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