CPI Preview: Inflation to fall below 14% YoY in May
Abdur Rahman | May 24, 2024 at 03:48 PM GMT+05:00
May 24, 2024 (MLN): Headline inflation is expected to decelerate significantly to around 13.9% YoY in May 2024, pushing real interest rates above 8%.
This notable slowdown is attributed to a substantial decline in monthly prices coupled with a favorable base effect.
Monthly inflation is projected to fall by 1.4%, marking the second consecutive monthly decline and significantly below the last 12-month average increase of 1.35% MoM.
Accordingly, this will take the average yearly inflation of 11MFY24 to 24.7% YoY compared to 29.2% YoY in the same period of FY23.
| National Consumer Price Index | ||||||
|---|---|---|---|---|---|---|
| May 2024E | Indices | |||||
| Weight | YoY | MoM | May-2024 | Apr-2024 | May-2023 | |
| Headline CPI | 100% | 13.90% | -1.40% | 259.64 | 263.32 | 227.96 |
| Food & Non-alcoholic Bev. | 34.58% | 3.56% | -4.39% | 273.85 | 286.43 | 264.45 |
| Alcoholic Bev.& Tobacco | 1.02% | 3.21% | 0.48% | 367.84 | 366.07 | 356.40 |
| Clothing & Footwear | 8.60% | 18.37% | 0.78% | 240.23 | 238.38 | 202.95 |
| Housing, Water, Electricity, Gas & Fuels | 23.63% | 35.55% | 0.56% | 241.16 | 239.81 | 177.92 |
| Furnishing & Household Equipment Maintenance | 4.10% | 13.44% | 0.10% | 266.68 | 266.41 | 235.09 |
| Health | 2.79% | 18.10% | 0.51% | 238.50 | 237.29 | 201.94 |
| Transport | 5.91% | 9.25% | -2.66% | 311.75 | 320.28 | 285.36 |
| Communication | 2.21% | 12.57% | -1.27% | 133.14 | 134.85 | 118.27 |
| Recreation & Culture | 1.59% | 7.92% | 1.32% | 262.18 | 258.77 | 242.93 |
| Education | 3.79% | 13.91% | -0.35% | 195.51 | 196.2 | 171.63 |
| Restaurants & Hotels | 6.92% | 15.59% | 0.85% | 271.68 | 269.38 | 235.03 |
| Miscellaneous | 4.87% | 14.82% | 0.34% | 283.19 | 282.22 | 246.64 |
The decrease in monthly inflation is largely driven by 440 basis points (bps) fall in Food index.
This is primarily attributed to the deflated prices of Onions, Tomatoes, Chicken, and Wheat.
Moreover, Transport index is anticipated to decrease amid deflated fuel prices.
Inflation Sensitivity
If consumer prices rise an average 0.5% a month going forward, annual inflation will drop to about 7.4% by end-December 2024.
With a 1% monthly increase, annual inflation will fall to about 11.7% by end-December.
Meanwhile, with an average monthly increase of 1.35%, which is the last 12-month average, annual inflation will stand at 14.8% by December.
The following chart maps out the yearly inflation trajectory based on monthly inflation rates of 0.5%, 1%, and the last 12-month average of 1.35%
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