KARACHI, Aug 23: The monthly inflation in July 2006 was higher than past five years average of monthly increase, said a State Bank report issued on Wednesday. “The monthly inflation, percentage change of price index, in July over June 2006 shows that overall CPI increased by 1.6 per cent which is higher than past five years average of monthly inflation,” said the State Bank publication “Inflation Monitor July 2006.”

The monthly inflation was 0.6pc in June 2006 while in July it was 1.6 per cent. The report said that the five years average of monthly inflation was 1.3 per cent.

Both the food and non-food group posted substantial increase in July on month-on-month basis. Food inflated by 2.6 per cent in July compared to 1.18 per cent in June 2006. It was also higher than past five years average of 2.4 per cent food price increase.

The non-food group showed a monthly increase of 0.9 per cent in July compared to 0.2 per cent in June 2006. The five years average was 0.5 per cent.

Analysts said that the monthly increase in consumer price index (CPI) should be considered as red signal and a close watch was needed.

They said the monthly CPI increase by 1.6 per cent could prove catalyst for the inflationary trend in future and produce undesirable results for current fiscal.

The report said that the long-run trend of inflation measured as 12-month moving average shows that both CPI and SPI continued to be at their declining path though they are still above their historical averages.

However, the consumer price inflation in July 2006 remained almost the same at 7.6 per cent on year-on-year (y-o-y) basis as in the month earlier.

The report said that the wage inflation was 17.0 per cent in July 2006 compared with 18.2 per cent in the previous month.

However, it was significantly higher than 11.6 per cent in July last year, the report said.

The wages of skilled workers increased by 16.8 per cent and for laborers by 18.5 per cent during July 2006.

“The average real wage inflation kept rising but with the slow rate of 9.4 per cent in July 2006 as compared with 10.6 per cent in the preceding month,” said the report.

Of the 250 non-food commodities included in the CPI basket, 37 commodities witnessed double digit inflation which include items like gas, petrol, high speed diesel, rickshaw and taxi fares, train and air fares, laundry services, primary school fees, some books, etc.

There were 48 commodities that showed moderate inflation in the range of 5 to 10 per cent, all other commodities witnessed either y-o-y deflation or inflation of less than 5 per cent.

The report said that the highest inflation was recorded in Islamabad 10.7pc and the lowest in Larkana 3.4pc during July 2006. Like in the previous month, the highest food inflation was witnessed in Kunri – big chilies market of Sindh - while the highest non-food inflation in Okara. Of the 35 cities covered in the consumer price index, 22 cities had more than average inflation which included Islamabad, Lahore, Multan, D.G. Khan, Peshawar, Quetta, etc., while Karachi, Faisalabad, Larkana, etc., were witnessing below average inflation.