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 the introduction of 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% |
|
BIPL |
10.80% |
1.00% |
|
Range |
11.55% – 10.7% |
1% – 0.2% |
|
Mean |
11.09% |
0.62% |
|
Median |
11.10% |
0.60% |
|
Mode |
10.90% |
1% |
Keeping in view the above expectations, inflation is expected to clock in within a range of 11.55% -10.7% YoY, with an average value of 11.09% 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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