By: Shajar Capital Pakistan Private Limited
Economy: Pakistan’s headline inflation measured by Consumer Price Index (CPI) for Nov’15 clocked in at 2.73% vs. 3.96% recorded last year, according to the data published by Pakistan Bureau of Statistics (PBS). This leads to an average inflation for 5MFY16/11MCY15 inflation of about 1.86%/2.47% vs. 6.45%/7.46% recorded in the CPLY.
A broad surge in inflationary pressures has been witnessed as CPI rose 0.59%MoM. Key CPI measures include 1) Food Basket registering an uptick of 1.26% amid 3.01% escalation in perishable items 2) 0.39% rise in clothing and footwear prices 3) 0.73% build-up in transport index due to revision in oil related prices.
Stepping forward, in addition to high base erosion, inflationary pressure may emerge from: 1) application of additional regulatory duty and custom duty 2) Higher petroleum prices and (Government kept Petrol & HSD prices unchanged for Dec’15) and 3) resultant impact on food prices and 4) further rupee depreciation
We have revised our estimate of headline inflation for FY16 from 3.5-4% to 4-4.5% as we incorporate additional tax measures announced by the government. However, we maintain our stance of no interest rate hike for remainder of FY16.