CPI Preview: Persistent hike in prices of food items to weigh on inflation

January 31, 2020 (MLN): Pakistan Bureau of Statistics is slated to announce the CPI numbers for the month of January on February 3, 2020. Going by the projections given by several brokerage houses, it is likely that the CPI figure will settle at 13.6% YoY during the month, against 12.63% recorded in the previous month of December, 2019.   

This consensus is mostly backed by the SPI figures, which as per the data released by PBS, decreased by 0.18% for the Combined Group during the week ended Jan 16, 2020 and increased by 20.02% compared to the corresponding period from last year.

The assumptions put together to determine the forecasted CPI numbers also include a substantial rise in the prices of Food and Non-Alcoholic Beverages, along with other groups such as Housing, Clothing and Transport.

Without any doubt, the persistent yet unreasonable increase in the prices of items within the food group has led to these undesirable expectations. The major items that were subjected to significant price hike include chicken, wheat, edible oil, eggs, sugar and pulses.

The second largest majority of the brokerage firms is of the view that inflation will touch, if not surpass, the 13.70% mark. If that happens, Pakistan will witness the highest level of inflation in the last nine years.

It is anticipated that the inflation will continue to climb in the upcoming months, mainly owing to proposed increase in the rates of gas and electricity, the announcement of which is expected very soon. Besides that, the rise in the prices of other utilities such as water may give further boost to the inflation.

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