Inflation: Down but not out of mind

After surprisingly aggressive price hike in April, the consumer price index tamed during May, thanks to a reversal in the price of fuel and perishable food items.
A minimal 0.06 percent increase in CPI during May took the 12-month inflation above 13 percent (for the second consecutive month). Albeit, the real factor behind this is low base, unlike the nearly two-percent jump in prices during April.
Average inflation in the Jul-May period ended at 11.6 percent, and it will likely remain below 12 percent (upper limit of the revised SBP target) in the outgoing fiscal year.
Thankfully, non-food and non-energy inflation, after a blip in April, is back on its downhill journey. Yet, currently at 10.3 percent, NFNE inflation is 40 bps higher than year-to-date low of 9.9 percent seen in March. Trimmed core inflation is also far above (210bps) its trough in December.
Aside from volatile prices of perishable food items, international crude oil prices are also contributing to the uneven monthly path of price index.
Arab light oil price, which was down by 9 percent in May on average, resulted in a decline of 4.27-7.96 percent on various petroleum products in June, a fall which was recorded in Mays inflation.
Mind you, crude oil was up by 5 percent in April, following which the price of petrol, diesel and kerosene has risen higher by 2.82 percent, 4.65 percent and 5.14 percent respectively.
With oil continuing its downward journey in the first two weeks of June, inflation numbers for this month may ease a bit.
Barring this volatility and one-off items (like revision of charges by PTCL in April), the usual suspects such as house rent, which comprises almost one-fourth of CPI, continued its smooth movement.
It is ironic that house rent increased by 10.5 percent year-on-year in May, according to FBS data, whereas according to anecdotal evidence house rent is virtually at the same level as it was last year, especially in posh urban areas.
Its time that the statistics department pulls its socks and works on redesigning the index on a rational basis.
Inflation is not just an important measure in designing economic policies, especially monetary policy, but it is also used as a benchmark for public and private sector for the annual appraisal of employees.
In the recently published economic survey, Dr. Sheikh and his team rightly emphasized on the significance of documentation, but, an equally important emphasis has to be laid on accurate and updated collection of key economic data including inflation and unemployment.