CPI sets to ease at 26.52% YoY: Economist Estimates

October 31, 2023 (MLN): The headline inflation for the month of October 2023 is expected to settle around 26% – 27.3% YoY with an average estimate of 26.52% YoY compared to 31.4% YoY in September and 26.6% YoY in the same month last year, as per the projections put forth by various brokerage houses/economists.

This would bring 4MFY24 average inflation to 28.37% as against 25.48% YoY in the corresponding period last year.

On a monthly basis, the inflation is expected to move up with an average estimate of 0.78% MoM compared to 2% MoM in September.

The deceleration in inflation is primarily driven by a 2.1% MoM reduction in the transportation index, stemming from a slightly over 2% MoM decrease in domestic petroleum product prices, according to the Arif Habib Limited report.

Additionally, it is expected that the food index will also decline MoM by 0.1%, primarily due to monthly price decreases in items such as chicken, cooking oil, fresh fruits, pulses, sugar, and gur, the report added.

On the other hand, the housing index is expected to show a 2.7% MoM growth, mainly on the back of quarterly rent adjustment, it added.

Outlook

Inflation is expected to decline significantly in October, owing to downward adjustments in fuel prices, easing prices of some major food commodities, and a favorable base effect.

Moreover, inflation is anticipated to decline substantially from the second half of FY24, barring any major adverse developments.

The recent uptick and volatile trend in global oil prices, as well as the second-round effects of a substantial increase in gas tariffs, pose some upside risk to the inflation outlook.

Core inflation is also persisting at elevated levels; remained around 21% during the last four months.

However, the fiscal policy is also contributing to the overall stabilization measures, which, coupled with better availability of food commodities, is likely to supplement the central bank’s efforts to bring down inflation.

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