04/04/2017 (Daily Times) - The Consumer Price Index (CPI) inflation general increased by 4.9% on a year-on-year (YoY) basis in March 2017 compared to an increase of 4.2% in the previous month, reported the Pakistan Bureau of Statistics (PBS) on Monday.

The CPI inflation general was recorded at 3.9% in March 2016 while on a month-on-month basis, it increased by 0.8% in March 2017. This is compared to an increase of 0.3% in the previous month and an increase of 0.1% in March 2016. By this, the average CPI inflation rose to 4.1% in the first nine months of the current fiscal year 2016-17 (FY17).

"This rise was mainly due to fewer supplies of fresh vegetables, a visible recovery in the global prices of food commodities such as palm oil, and rice and sugar, the impact of taxation measures in the Federal Budget for 2016-17 on various items such as cigarettes, powdered milk, stationery items and cement; and a gradual build-up of domestic demand as evident in rising core inflation, especially non-food-non-energy (NFNE)", wrote the State Bank of Pakistan (SBP) in its second quarterly report for FY17.

The central bank said that the OPEC agreement to cut output in the later part of the second quarter of FY17 caused a rising trend in crude oil prices, as these have recovered by 25.0 percent between November 2016 and February 2017.

As anticipated, the government has partially passed on its impact to domestic consumers from mid-January 2017 onwards.

"The factors that may contribute to domestic inflation during the remaining months of FY17 are global commodity and oil prices - which are expected to move in an upward direction - and which will be affecting domestic inflation. The construction component of WPI is showing a robust increase recently, which may transmit to wages and prices of construction items in CPI", the SBP forecasts.

Moreover, as the construction cost is reflected in house rent, an upward revision in house rent index - the largest component of CPI - may also put upward pressure in the CPI inflation.

On the flip side, recent rains will likely improve supply conditions of wheat and perishable food items, which will further help mitigate inflationary pressures. "Thus, on balance, we expect the annual CPI inflation to remain close to 4 percent during FY17", added the SBP.

Core inflation measured by non-food non-energy CPI (Core NFNE) increased by 5.3% on a YoY basis in March 2017 compared to an increase of 5.3% in the previous month and 4.7% in March 2016. On a MoM basis, it increased by 0.1% in March 2017 as compared to an increase of 0.2% in the previous month, and an increase of 0.2% in the corresponding month last year i.e. March 2016.

Core inflation, measured by 20% weighted trimmed mean CPI (Core Trimmed), increased by 4.5% on a YoY basis in March 2017 compared to 4.1% in the previous month and by 3.8% in March 2016. On a MoM basis, it increased by 0.2% in March 2017 compared to an increase of 0.2% in the previous month and an increase of 0.2% in the corresponding month of last year i.e. March 2016.