CPI Preview: Inflation to hit two-digits?

July 31, 2019 (MLN): The last day of July 2019 has brought us on the edge with anticipation on the Consumer Price Indicator (CPI)’s latest position.

To recall, annual CPI growth for June stood at 8.9%, and going by the last few weeks’ SPI figures it is apparent that yearly inflation for July will definitely increase. In addition to this, various brokers’ projections suggest that yearly inflation for July 2019 will definitely cross 10% which will mark the largest CPI growth in the last 68 months or 5 year and 8 months.

CPI for June 2019: 8.90%

Forecast for July:

According to their research work, inflation growth this month was largely influenced by a surge in gas and electricity price, House Rent Index (HRI) and food prices, especially non- perishable items, dairy food and fresh fruits.

As per Shajar Capital’s estimates, the government hiked gas prices by 102% on average for different slabs whereas electricity tariffs recorded 14% hike during the month.

The food index on the other hand inflated by around 7.52%, YoY, as per Abbasi and Company’s calculations, whereas HRI inflated by 14.09%, YoY as per WE Financial Services.

However, the market foresees a reversion in inflationary pressures in future. Ms. Sidrah Azmat Khan for Next Capital wrote in her research note that, “While the pricing burdens reinforce our repetitive rhetoric  of  a  blow  in  aggregate  demand  and  subdued growth in produce of 2.9%YoY in FY20, our forecasts illustrate a reversion in inflationary pattern after the first half of the current fiscal year.”

She believes that, “the economy is set to transcend upon single digit inflation readings where our revised estimate for FY20 average shall hover around the 10% mark.”

It is to be recalled that starting from this round of CPI releases, the base of price statistics will be changed from 2007-08 to 2015-16. However, the old series of 2007-08 will continue to be published for another year along with the new series of 2015-16 so that comparative analysis can easily be carried out.

Copyright Mettis Link News