CPI eases to 11.8% YoY in May

June 03, 2024 (MLN): The consumer price index (CPI) for May 2024 clocked in at 11.8% YoY, compared to 17.3% YoY in the last month and 38.0% YoY in May 2023, the latest data issued by the Pakistan Bureau of Statistics (PBS) on Monday showed.

On a monthly basis, CPI fell 3.2% in May 2024 as compared to a decrease of 0.4% in the previous month and an increase of 1.6% in May 2023.

The inflation figures came in cooler than the MG Research's expectations, as well as the Finance Ministry's forecast.

Accordingly, this takes the average yearly inflation of 11MFY24 to 24.5% YoY compared to 29.2% YoY in 11MFY23.

Monthly prices recorded the largest decline in 47 years, and the second-largest in history.

The slowdown was driven by a substantial reduction in food prices. The food index fell 7.83% compared to last month and 0.17% compared to a year ago.

The monthly decline in food index was due to a 20.10% decline in perishable food items.

According to a finance ministry's report, government is ensuring the improved availability of perishable and staple food items like wheat, in order to support the marginalized sections of society.

Transport costs fell 1.63% compared to April 2024, while they rose 10.41% compared to May last year.

The average core inflation, measured by non-food non-energy, rose 14.2% YoY in May 2024 as compared to an increase of 15.6% YoY in the previous month and an increase of 22.7% YoY in May 2023.

On a monthly basis, average core CPI increased 0.4% in May 2024 as compared to an increase of 2.1% in the previous month and an increase of 1.7% in May 2023.

With the CPI-based inflation rate at 11.8% and the policy rate at 22.0%, the real interest now stands at 10.2%.

The central bank, which has kept interest rates at a record 22% since June last year, will review monetary policy on June 10.

The State Bank of Pakistan (SBP) is expected to cut its policy rate by 100 basis points (bps), the first in almost four years after what has been the most aggressive fight against soaring inflation.

Outlook

If consumer prices rise an average 0.5% a month going forward, annual inflation will drop to about 3.4% by end-December 2024.

With a 0.95% monthly increase, which is the last 12-month average, annual inflation will fall to about 6.6% by end-December.

The following chart maps out the yearly inflation trajectory based on monthly inflation rates of 0.5%, and the last 12-month average of 0.95%

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