CPI drops significantly to 20.52 percent

[LahoreEstate]

CPI drops significantly to 20.52 percent

By Tanveer Ahmed

KARACHI: Consumer Price Index (CPI) based inflation eased off during month of January as it dropped substantially to 20.52 percent from 24.43 percent observed during the month of December 2008-09.

The decline in CPI inflation during the month under review has been attributed to a fall in the commodities prices as well as the domestic petroleum price, whose downward revision in December started impacting the inflation in January.

During July-January of current fiscal, it stood at 23.52 percent over the same months of previous year, Federal Bureau of Statistics (FBS) reported on Monday. The inflation number of January over the preceding month of December was even more encouraging as it decreased by 0.42 percent.

“These are quite encouraging inflation numbers, which are likely to drop as the year passes on,” Mohammad Imran, Head of Research at First Capital Equities Limited (FCEL) believed.

He predicted substantial decline in inflation number during the month of March and forecasted that if the current trends persists, inflation might end up in single digits in month of May or June of the year on month-on-month basis.

Imran held that the core inflation is the key factor to be watched for any interest cut by central bank.

“The core inflation numbers are intact for the last couple of months and if they go down or even remain constant, a downward revision in the discount rate could not be ruled out,” he noted.

The inflation number for the whole year could fell to 19 percent, which would be below the revised target of 20 percent.

It is pertinent to mention that high commodities and petroleum prices pushed up the inflation to its highest level to 25 percent in first quarter of the current fiscal.

The CPI basket shows that food inflation, having over 40.24 percent wieghtage in the CPI basket also surged 21.61 percent in January of current fiscal over the preceding year. Fuel and lighting index kept rising during the month and is up by almost 27 percent followed by transport and communication, which rose by 25.22 percent.

The education is still costly with its index rising by 17.06 percent and Medicare’s cost was up by 14.36 percent during January. During first six months of 2008-09, Wholesale Price Index (WPI) and Sensitive Price Index (SPI) rose by 26.15 and 29.42 percent, respectively.

http://www.dailytimes.com.pk/default.asp...2009_pg5_1