CPI Preview: Inflation to spike in September

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By MG News | September 30, 2019 at 01:47 PM GMT+05:00

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September 30, 2019 (MLN): As the 3rd month of the current fiscal year nears end, the Pakistan Bureau of Statistics (PBS) is all set to disclose the numbers for Consumer Price Index (CPI) on Tuesday i.e. Oct 1, 2019.

The one important facet of September’s CPI figures is that it will now be based on price statistics from FY2016, instead of the base year that was currently being used, which was FY2008. The distinct feature of the new base CPI is Rural Price Index (RPI), whereas up until now it was largely reflecting prices in urban areas. Moreover, cities are assigned weights according to the population size.

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 are listed below:

CPI Forecasts for September 2019

Brokerage House

Forecast (in %), YoY

Forecast (in %), MoM

Pearl

10.90%

0.50%

Sherman

10.70%

0.20%

Spectrum Securities Limited

11.20%

0.60%

Insight Securities

11.20%

0.60%

Abbasi & Co.

11.30%

0.70%

Ismail Iqbal Securities

11.30%

0.70%

Al Habib Capital Markets

11.55%

0.95%

Darson Securities

10.90%

0.40%

Shajar Capital

11.10%

0.51%

Arif Habib Limited

11.02%

0.61%

Capital Economics

12.00%

-

Foundation

11.30%

-

MCBAH

11.00%

-

IMS

10.80%

-

Topline

10.92%

-

WE Research

11.14%

-

BIPL

10.80%

1.00%

Range

12%  - 10.7%

1%  - 0.2%

Mean

11.13%

0.62%

Median

11.10%

0.60%

Mode

11.30%

1%

 

 

Keeping in view the above expectations, inflation is expected to clock in within a range of 12% -10.7% YoY, with an average value of 11.13% in Sept 2019, as compared to 5.40% YoY in the same period of last year and 10.49% in the month of Aug 2019. 

These inflation prospects are subject to several factors including: increase in food index especially upsurge in prices of perishable items due to the extended season of monsoon which resulted in disrupted supply across the country, input costs, volatility in international oil prices, upward adjustment in electricity and gas tariffs and surge in prices of imported goods due to PKR depreciation.

Moreover, National CPI is likely to be pushed by an increase in the prices of cotton cloth, house rent and readymade food.

As the new base CPI includes RPI and UCPI, therefore, as per Abbasi and Company’s calculations, urban  CPI inflation (UCPI) (60%  of  NCPI) and  rural  CPI  inflation (RCPI)  (40%  of  NCPI)  are expected  to increase by 11.6%  YoY (0.7%  MoM) and 11.1% YoY(0.7 MoM) respectively as compared to 10.6% YoY (1.5% MoM) and 10.3% YoY (1.9% MoM) respectively in last month.

Given the evolving macroeconomic condition, the state bank of Pakistan kept the policy rate unchanged at 13.25%. However, the gradual drop in CPI due to rebasing of inflation to 2015-16, continuous increasing fiscal deficits, inversion of yield curve and contraction in current account deficit in two months of FY20 may signal the SBP to lower its policy rate gradually with a cautious approach in mid CY20.

 

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