CPI likely to clock in at 23.34% YoY: Economists' Estimates

February 29, 2024 (MLN): The headline inflation for February 2024 is expected to slow down with an average estimate of 23.3% YoY compared to 28.3% YoY in January and 31.6% YoY in the same month last year, as per the projections put forth by various brokerage houses/economists.

This would bring 8MFY24 average inflation to 28.1% YoY as against 26.2% YoY in the corresponding period last year.

On a monthly basis, the inflation is expected to move up with an average estimate of 0.3% MoM compared to 1.8% MoM in December, and far below the 12-month average of 2.1% MoM.

The moderate increase in monthly inflation is primarily attributed to decrease in food index which is expected to decline MoM (-0.9%), according to Arif Habib Limited (AHL).

The decrease in the food index is mainly due to decline in prices of items such as eggs, onions, tomatoes, oil and ghee.

Meanwhile, an increase is expected in the Transport index (+2.5% MoM) and housing index (+2.0% MoM).

"The housing index is expected to rise mainly due to an increase in gas tariff, which we've factored into our base case assumption," AHL said.

However, so far the SPI numbers reported for the month do not reflect this increase, and if the same is not reflected in the CPI for the outgoing month, then the CPI could decrease by 43bps to 23.1%, it said.

In addition, the transport index is expected to remain elevated due to a MoM increase in petroleum product prices.

Looking forward, headline inflation is anticipated to decrease primarily due to the significant base effect.

Nevertheless, it is important to recognize various risk factors that might affect these forecasts, such as: i) fluctuations in food prices (associated with Ramadan), ii) potential depreciation of the PKR against the USD, and iii) continuous rises in international oil prices.

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