ISLAMABAD (Reuters): Picking up the pace at the outset of the new fiscal year, headline inflation came in at 12.6% year-on-year (YoY) in June compared to 11.8% in May, according to data released by the country’s federal statistics agency on Monday. This increase aligns with market and government expectations.
According to the Pakistan Bureau of Statistics (PBS), the Consumer Prices Index (CPI) based inflation increased by 0.5% on a month-on-month basis in June. The CPI-based inflation in May rose 11.8% from a year earlier, the lowest reading in 30 months and below the finance ministry’s projections.
The country has been beset by inflation above 20% since May 2022. Last year in May, inflation jumped as high as 38% as the country navigated reforms as part of an International Monetary Fund (IMF) bailout programme. However, inflation has since slowed down. Brokerage firm Topline Securities noted that the reading matched their projections, so it did not surprise them.
This CPI reading brings the average inflation for fiscal year 2023-24 to 23.4%, compared to 29.2% in fiscal year 2022-23. The Ministry of Finance, in its Monthly Economic Update and Outlook report, had forecast a marginally higher inflation rate for June 2024 compared to the previous month but noted it was still lower than the same period last year. The ministry attributed the hike to higher prices of perishable items driven by Eid ul Adha and added that the government is working to manage supply and demand to bring about price stability, reduce market volatility, and improve the inflation outlook.
JS Global Research, another brokerage firm, had projected CPI inflation to hover around 12.5% YoY, with the FY24 average at 23.8%, continuing the slowdown that started in May (11.8%). This compares to 17.3% in April and a significant drop from 29.4% in June 2023. “June is expected to see a 37 basis points month-on-month decrease in food inflation, following an 8% month-on-month drop in April. This translates to a year-on-year food inflation rate of just 0.5% in June, a significant improvement from 39% in Jun-2023,” JS Global said in its report.
AKD Securities Limited, another brokerage house, estimated that inflation would register a 12.55% year-on-year increase, up from 11.76% in the previous month. “On a monthly basis, it is likely to ascend by 0.45%, following a slight rebound in vegetable prices due to ongoing festivities during the current month,” the AKD report said.
As per the AKD report, with both food and fuel indices slowing down in May, “we anticipate near-term CPI readings to remain highly susceptible to the upcoming inflationary hikes announced in the federal budget”.
“Additionally, any further rebounds in essential commodity prices driven by a pullback in crude oil in the wake of global monetary easing, alongside moderate weakness in the domestic currency, if any, may keep disinflationary prospects in check,” according to the AKD report. The parliament on Friday, June 28, passed the government’s tax-heavy finance bill for the current fiscal year amid an annual inflation projection of up to 13.5% for June 2024.
