Inflation survey reveals prices staying low

People believe prices of everyday items will increase at a slower-than-usual pace

KARACHI: Pakistani consumers foresee low inflation in coming months, according to a survey jointly conducted by the State Bank of Pakistan (SBP) and the Institute of Business Administration (IBA).

The May edition of the bi-monthly SBP-IBA Consumer Confidence Index (CCI) shows a ‘significant’ increase of 8.2% over the preceding survey undertaken in March. CCI clocked up 166.7 points in May, which is the highest level recorded since the inception of the survey in January 2012.

The survey covers three broad themes: overall consumer confidence indices, inflationary expectations and other key highlights about households’ perception of important indicators.

The survey uses CCI to measure households’ perception about the economy. Both of the sub-indices, namely Current Economic Conditions (CEC) and Expected Economic Conditions (EEC), also registered an increase of 8.1% and 8.2%, respectively, from the March edition.



The survey reveals that Pakistanis believe prices of everyday items and services will increase at a slower-than-usual pace in months ahead. It is important to note that expectations about inflation actually play a most significant role in determining the overall price level in an economy. Economists believe prices go up partly because people expect them to rise.

Year-on-year inflation in April stood at 2.1%. According to Topline Securities analyst Umair Naseer, inflation will remain in the range of 4.5%-5% in 2014-15 as opposed to 8.6% in 2013-14. His brokerage house anticipates inflation to hover around 5.5%-6.5% due to an expected increase in oil prices and aggregate demand.

The central bank brought down the key interest rate on May 23 by 1% to 7% mainly on the back of declining inflation. It has also revised its inflation projection for 2014-15 from 8% to 4%-5%.

The percentage of households expressing interest in buying a car or a house in the next six months increased in May compared to March, according to the latest edition of the SBP-IBA survey.

Similarly, a higher percentage of people in May are positive about better financial conditions in the next six months.

Published in The Express Tribune, May 30^th,  2015.

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