A southward turn in inflation had become pretty much an expectation over the past few months, and the SBPs recent monetary policy stances reiterated this. But last month - October 2012 - CPI went quite low, reaching the lowest inflation level in the last three years at 7.66 percent on a year-on-year basis. CPI level, lower than this, was last seen in October 2009 at 7.54 percent.
On a month-on-month basis, CPI netted at 0.38 percent.
A detailed look into the numbers reveals that the food sub category is majorly showing a decrease in inflation numbers, with perishable food items showing a month-on-month and year-on-year decrease in prices. In fact, there was a month-on-month decline in food prices in general.
Prices of chicken went down by six percent relative to the previous month (possibly an effect of Eid-ul-Azha), while fresh fruits and tomatoes also showed significant month-on-month declines - nine percent and 7.5 percent, respectively.
The housing, water, gas and electricity sub index, meanwhile, showed the greatest month-on-month increase this fiscal year, led mainly by an increase in house rent as well as costs of construction.
Clothing prices also followed the housing sub index in terms of the highest month-on-month increase registered for the fiscal year to date. This is explained mainly by an increase in prices of woolen readymade garments and woolen cloth - in all likelihood a seasonal factor.
Transport, meanwhile, witnessed a month-on-month decrease this year, led primarily by the decrease in motor fuel prices.
But the real catch is the 1.8 percent month-on-month increase in non-food-non-energy inflation, and 0.8 percent in trimmed core inflation - both being the highest for this fiscal year. These should keep the SBP on its edge when devising the upcoming monetary policy as these should have a bearing on the next discount rate decision.
However, the fact that the inflation recorded in October is a 36-month low cannot be ignored, and one will not be surprised to see a further rate cut in the next monetary policy decision.
=========================================================
MAJOR CPI GROUPS - OCT 2012
=========================================================
Y/Y M/M
chg (%) chg (%)
=========================================================
CPI general 7.66 0.38
Food & non-alcoholic beverages 5.18 -0.12
Non-perishable 7.37 0.25
Perishable -5.67 -2.19
Housing, water, elec, gas & other fuels 4.17 1.32
Clothing & footwear 14.41 1.11
Transport 15.62 -1.56
NFNE 10.80 1.80
Core Trimmed 10.00 0.80
---------------------------------------------------------
Source: PBS.
=========================================================