The CPI inflation on year-on-year basis declined to 6.4 percent in July 2007 from 7.6 percent registered in July 2006 . The State Bank of Pakistan in its 'Inflation Monitor July-2007' issued here on Friday, said that CPI food inflation increased to 8.5 percent in July 2007 as compared with 7.4 percent in the corresponding month of last year.
This was mainly due to rise in the prices of some key food items including vegetables, fruits, eggs, meat, different types of rice, etc, while for the same period non-food inflation declined to 4.9 percent from 7.8 percent of last year.
Similarly, 12-month moving average CPI inflation for July 2007 also showed a decline as compared to the same period of last year from 7.9 percent in July 2006 to 7.7 percent in July 2007, while the corresponding food inflation depicted a rise to 10.4 percent in July 2007 from 10.3 percent in July 2006 and non-food inflation showed a decline to 5.8 percent in July 2007 from 6 percent in July 2006.
In contrast with annual CPI, monthly CPI inflation showed significant increase and was recorded at one percent, which was less than the five-year average of monthly increase in July.
This significant increase in overall monthly CPI inflation was primarily due to a significant one-month increase in food inflation, recorded at 1.5 percent, which nevertheless showed an improvement as compared to the 2.6 percent inflation in July 2006 and the five-year monthly average food inflation of 2.1 percent. The monthly increase in non-food inflation was recorded at 0.7 percent as compared to 0.9 percent in July 2006, which was more than the five-year average.
The core inflation based on non-food non-energy (NFNE) declined to 6 percent in July 2007 from 6.5 percent in July 2006 on year-on-year basis, whereas core inflation based on 20 percent trimmed-mean showed an increase to 6.6 percent in July 2007 as compared to 6.3 percent in July 2006.
"Since food inflation has been persistently rising in contrast with non-food inflation, the exclusion of all food items necessarily produces a downtrend. However, variability in core (trimmed-mean) inflation mirrors the volatility of the prices of a number of food items. Hence, in the present circumstances, the persistent component of inflation is being better captured by the trimmed-mean definition of core inflation. The bottom line is that the declining trend in non-food inflation this year has so far been countered by the rising trend in food inflation, with the result that CPI inflation remained at a higher level than the target for FY07.
The Wholesale Price Index (WPI) inflation, that had remained on a rising trend during FY06, started declining from the beginning of FY07. This deceleration trend continued over the subsequent months of the current fiscal year. WPI inflation declined to 7.6 percent in July 2007 on year-on-year basis from 8.4 percent in the corresponding month of last year.
This significant decline in WPI inflation was due to a sharp deceleration in non-food inflation during July 2007 compared to the corresponding month of last year. The sensitive price indicator (SPI) decreased to 7.5 percent in June 2007 on year-on-year basis from 8.6 percent in the same month last year.