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Consumer Price Index rises 12.34 percent in July.

KARACHI, Aug. 12 -- Consumer Price Index (CPI) inflation rose 12.34 percent in the first month (July) of the current fiscal year, indicating inflationary pressures continue to haunt the consumers.

Though, headline inflation for the month of July 2010 eases against 12.69 percent in the preceding month of June, however monthly inflation was up in comparison with 10.21 percent in the same month of last year, Federal Bureau of Statistics reported on Wednesday.

During the month, CPI index grew strongly by 123bps month on month (MoM) with a strong uptick in food and energy prices. Analysts said that owing to surging flood inflationary pressure as well as electricity tariff increase, inflation continued its upward trend during the first month of this financial year. Meanwhile, incremental impact of hike in GST rate to 17% also played its part in pushing up the CPI.

They anticipate further inflationary pressures to build further up owing to both Ramazan factor as well as supply disruptions caused by flood. Food index grew 148bps MoM on account of rising prices of vegetables and grains whereas 7.6% increase in power tariff took fuel & energy inflation up 391bps MoM. Analysts said that recent hike in discount rate by 50 bps to 13 percent by the State Bank of Pakistan was also due to these inflationary pressure which it anticipated by observing the trends.

Kamran Rehmani, analyst at First Capital Equities Limited anticipated that an uptick in price level in the upcoming months is owing to soaring prices of perishable food items due to floods in rural & suburban areas of the country, elimination of subsidies post reformed GST and further anticipated increase in electricity tariffs. He said that our inflation forecast is higher than the government's target of 9.0% and the SBP's projection of 11-12%.

He noted that inflationary pressure would entail continuation of tight monetary stance by the SBP at least in the second quarter of 2010. Among the major heads, food inflation was up 12.8% year on year (YoY), transport inflation was up 17.0%YoY and energy inflation was up 21.8%YoY in July 2010. However, rental inflation declined to 8.8%YoY in the month against 9.7%YoY in June 2010. Core inflation declined to 10.3% YoY in July 2010 against 10.4% YoY in June 2010 and 10.6% YoY in April 2010. "Sustained declining trend in rental inflation is a key reason behind the decline in core inflation in July 10", analysts said.

During the month under review, Sensitive Price Index (SPI) and Wholesale Price Index (WPI) rose 13.90 percent and 18.75 percent.

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Publication:Daily Times (Lahore, Pakistan)
Date:Aug 12, 2010
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