CPI inflation grows by 11% in October 2019

KARACHI: Consumer Price Index (CPI) for the month of October 2019 grew 11.0% YoY as compared to an increase of 11.4% YoY registered in September 2019. On a sequential basis, CPI incremented 1.8% in October 2019 versus 0.8% registered in the previous month.

With regards to inflationary trend in urban and rural areas, urban inflation arrived at 10.9% YoY compared to a higher 11.3% YoY rural inflation. The trend was similar for food inflation which clocked-in at 13.7% for urban and 14.6% for rural areas during the month. Moreover, core inflation was lower in urban (+7.7%YoY) compared to rural (+8.6%YoY) during October 2019.

Heavyweight food and non-alcoholic beverages group (CPI weightage 34.58%) was the primary driver behind surge in inflationary pressure during the month (+15.0% YoY) whereas housing and utilities group (+7.2% YoY) and transport (+16.5% YoY) were other major contributors in October headline inflation reading.

Consequently, average 4MFY20 (July-Octoner 2019) inflation stood at 10.3% YoY compared to a much lower reading of 6.2% YoY during the same period last year.

“With regards to inflation outlook for FY20, we expect average CPI accretion to range within 11.0%-12.0% for the current fiscal year which is in-line with SBP forecast. Predominant factors behind double-digit inflationary level for FY20 include significant hike in food prices, higher gas/power tariff, domestic POL prices at elevated levels and lagged impact of notable PKR devaluation,” a report issued by Pearl Securities said.

In terms of monetary policy implications, State bank of Pakistan (SBP) kept key policy rate unchanged at 13.25% in the last monetary policy committee meeting. With no notable subsidence in food inflation or domestic oil prices, we discount the possibility of any rate cut in the last monetary policy committee meeting of CY19 to be held this month. However with high-base coming into effect in CY20, we do expect slender reduction in rates during 1QCY20.


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