July-2019 Inflation likely to be 10.3%, to Touch Five Years high

The Mint PK

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July-2019 Inflation likely to be 10.3%, to Touch Five Years high

  • July-2019 Inflation is expected to touch Double Figure, last seen in 2013
  • Electricity and Gas Tariff increase to drive up inflation

The CPI inflation for the month of July-2019 is expected to increase up to 10.3% YoY. The Inflation is all set to enter Double-Digit Figure which was last seen in November-2013.

Pakistan Bureau of Statistics reported June-2019 Inflation at 8.9% YoY. Significant increase in July-2019 inflation is primarily due to the major increase in electricity, gas, housing and food prices.

The inflation is likely to remain high till December this year due to the lagged impact of 30% currency devaluation in the preceding 18 months.

The interest rate hikes of 800bps during the last 18 months have slightly contained a massive hike in the inflation and now it is expected to average around 11% in FY2020.

The highest increase in July was witnessed in the prices of wheat, ghee and milk which increased by 4% on average.

Impact of Electricity and Gas Price Increase

The domestic Gas prices have increased by 60% on average during the month of July. Gas Price has 1.6% weight in CPI Inflation calculation. Similarly, Electricity prices have increased by Rs1.5 per unit in July-2019 to Rs14.9/unit.Electricity price has a slightly higher weight of 4.4% in the Inflation Basket.

Rise in Taxes to induce further Inflation

The Government has announced aggressive tax measures in the recent budget to increase governmental revenue. This is expected to be inflationary in nature as the majority of taxes are Pass-Through in nature. The imposition of Sales tax in different segments and increase in Federal Excise Duty and Withholding taxes is expected to increase prices of different products in various segments of the economy.

Revision in House Index

House Rent index is scheduled for quarterly revision in July where it is expected that House Index will increase by 2% on average. House Rent Index has 21.8% weight in the Inflation Index.

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