It was the month-on-month change in CPI that stole the limelight for April FY12. At a month-on-month rise of about 1.83 percent, it clocked in at a 19-month high in the month under review. The year-on-year rise, on the other hand, stood at an 8-month high of 11.27 percent.
Much of the month-on-month rise was led by the food sub-index, which showed the highest rise relative to the previous month this fiscal year. Perishable food commodities, including vegetables, fruits, fresh milk, chicken, etc, saw their prices going up considerably in April, posting the highest month-on-month increase this fiscal year.
Ironically, prices of some vegetables (onions) and eggs went down, hinting at the existence on an anomaly in terms of market and supply chain efficiency when it comes to food commodities in the country.
The other culprit riding behind the hefty increase seen in Aprils CPI vis-à-vis the previous month was the transport sub-index, which saw a robust increase of over 4 percent. This did not come as much of a surprise, given the increase of over 8 percent in fuel prices announced at the beginning of April.
Since no increase or decrease in fuel prices have been announced at the beginning of May, not much month-on-month change is expected in the transport sub-index, going forward. However, the increase in the transport sub-index continues to be a cause for concern as it will likely have an impact on other indices, including food, going forward.
Worth mentioning on a year-on-year analogy were the clothing and footwear sub-index, which saw a whopping year-on-year rise of over 15 percent. Much of this can be attributed to an increase in price of value-added textile products.
While lawn cloth has recently seen rising demand and related price rises, the increase in textile products prices may also be going up after a lag from the cotton price bonanza seen previously.
The housing, water, electricity and gas sub-index also saw a significant month-on-month and year-on-year increase during April, explained plausibly by the increase in gas prices (increase of over 29 percent on a year-on-year basis), prices of firewood and kerosene oil.
Going forward, SPI data for the last two weeks of April, which will be used in computing inflation numbers for May FY12, showed a decrease on week-on-week basis. This indicates that the month-on-month inflation for May might not be as high as that seen in April.
Yet, inflationary concerns from government borrowing persist as the latest monetary policy statement of the SBP says: "Consistently growing government borrowing requirement from the banking system is a key variable that is adversely affecting the inflation outlook."
A question to ponder about is the increase in minimum wage of over 14 percent announced by the Federal Government which is followed by a double increment by Punjab Government. Well, it may take, on face of it, load of consumer prices hike; but its financing and wage spiral affect may negate real term impact.