Inflation may average 8pc

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ISLAMABAD : With a slow growth in food and energy prices, inflation is expected to average 8 per cent against the projection of 9pc by the end of the current financial year, reveals Economic Survey 2012-13.

Deceleration in food and non-food prices will help the government to achieve the inflation target.

Food inflation stood low during the July-May period because of improved supply of food-related items like potatoes, tomatoes, onion and vegetables.

The annualised inflation rate measured in terms of consumer price index (CPI) for the first 11 months of 2012-13 averaged 7.5pc against 10.9pc recorded in the same period of 2011-12. Food and non-food inflation almost followed the overall inflationary trends.

Food inflation averaged 6.6pc against 11.1pc last year and non-food inflation was 8.1pc as compared to 10.9pc during the same period of last year.

The CPI headline inflation based on year-on-year dropped to 5.1pc in May 2013 as compared to 12.3pc last year.

Food inflation (year-on-year basis) declined to 6.5pc, non-food to 4.1pc and core inflation to 8.1pc as compared to 11.3pc, 13.1pc and 11.1pc, respectively, of last year.

Food inflation during the current fiscal year is much slower than a year earlier, reflecting improved supply while deceleration in non-food inflation stemmed mainly from decreased prices of gas and fuel-related component.

The increase in non-food inflation largely stemmed from increase in the sub-indices of house rent, electricity tariff rates, education expenses, communication cost, fuel prices and clothing, footwear and cigarette prices.

Among non-food items, prices of petroleum products moved in line with international fuel rates and induced a hike in prices of diesel, petrol, gas, CNG and transportation which ultimately got reflected into a higher living cost and acceleration in inflation.

Core inflation is a component of overall inflation and is relevant to the State Bank of Pakistan for its monetary policy targets. Its index is estimated from the indices of 43 non-food-non-energy commodities.

Core inflation maintained at double digit since July till October 2012. However, from November onward it continued to remain at single digit with varying magnitude. The significant variation in the first four months versus to last six months is relevant to the variation in impact of money supply.

The declining trend in global commodity prices and improved supply of local consumable items contributed to its decline.

Courtesy: Dawn

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