Inflation 9MFY10 Review

Consumer Price Index (CPI) placed at 12.91%YoY
The Federal Bureau of Statistics (FBS) has recently disclosed the inflation figures for the period of 9MFY10. The CPI based inflation increased by 12.91%YoY during the period comparing to 13.04%YoY during the earlier month of the same year. However, the period witnessed the increment of 1.25%MoM during the period as the CPI index stood at 219.65 points against 216.93 points during the previous month. The continual dual number Inflation is largely because of higher international oil prices coupled with Government of Pakistan (GoP) borrowings for financing its fiscal deficit as well as increased power tariffs and supply side constraints.
Food and beverages led higher average CPI
The average CPI during the period of 9MCY10 rose by 11.29% comparing to 9MCY09. The upward momentum was principally motivated by the rise in prices of Food and beverages and non-perishable items in CPI basket.
SPI surged by 18.17%YoY
The Sensitive Price Index (SPI) and Wholesale Price Index (WPI) witnessed surge of 18.17%YoY and 21.80%YoY correspondingly during the period while comparing to the earlier month both reveals an upward trend of 0.78%MoM and 2.53%MoM respectively. Moreover, the indices of SPI and WPI stood at 255.84 points and 237.51 points respectively comparing to 253.87 points and 231.64 points respectively during the earlier month of the same year.
Core Inflation lowered to 9.90%
The core inflation stood at 9.90% during the period comparing to 10.10% during the earlier month which showed reduction by 20bpsMoM during the period while on yearly basis the downward trend continued during the period which depicted 46.49%YoY decrease comparing to the same period last year.
Looking Forward
I believe that additional raise in electricity tariff and volatile commodity prices will act as a medium to push the prices in upward move. However, the rebirth of higher base from 9MFY09 might carry various breathers to the elevated price levels. On the other hand the average inflation for FY10 is expected to settle around 12.5%.