Annual inflation fell to 3.56 per cent in August from 4.12pc in the preceding month, the Pakistan Bureau of Statistics said on Thursday.
The main inflation is measured by Consumer Price Index (CPI) which tracks prices of nearly 500 commodities every month across the country. The index went down by 0.3pc in August as compared to the increase of 1.3pc in the previous month and 0.2pc in August 2015.
The government has projected the annual inflation target at 6pc for the current fiscal year. Average annual inflation was 2.86pc a year earlier.
The food group, which has a weight of 37pc in the CPI basket, showed an increase of 3.4pc in August on a year-on-year basis on the back of rise in prices of perishable and non-perishable food items.
On a month-on-month basis, food inflation fell by 0.9pc in August due to a 6.5pc decline in prices of perishable products.
The food items whose prices increased included eggs (8.01pc), sugar (6.62pc), potatoes (4.24pc), pulse gram (2.6pc), gur (2.55pc), gram whole (1.63pc), besan (1.54pc), wheat (1.41pc) and rice (1.02pc).
Core inflation, measured by excluding volatile food and energy prices, was recorded at 4.6pc in August, slightly up from the previous month. This inflation has remained subdued since November last year because of a tighter monetary policy and reduction in food and fuel prices.
Government borrowing is one of the key factors influencing the trend of inflation as there is a positive relation between government borrowing and core inflation.
Non-food inflation was recorded at 3.7pc in August. This inflation has stagnated in the last four months as oil prices remained steady.
Among the non-food groups, education and health indices increased by 7.62pc and 5.82pc in August compared to the same month of the last year. The highest increase of 17.9pc was witnessed in the index of alcoholic beverages and tobacco.
The index of clothing and footwear rose by 4.48pc and that of housing, water, electricity, gas and other fuels by 4.77pc.
Meanwhile, the Sensitive Price Index edged up by 3.84pc and Wholesale Price Index (WPI) by 1.94pc.
The WPI has entered the positive growth trend from the new fiscal year, which shows a reverse in demand for domestic commodities.