April 26, 2024 (MLN): The headline inflation is expected to decelerate significantly to around 17% YoY in April 2024.
This significant slowdown is attributed to the favorable base effect coupled with a decline in monthly prices. Thus, real interest rates that turned positive last month will expand further.
The monthly inflation is expected to fall 0.7% MoM, the first monthly decline since June 2023, and significantly below the last 12-month average increase of 1.58% MoM.
Accordingly, this will take the average yearly inflation of 10MFY24 to 26.19% YoY compared to 28.1% YoY in 10MFY23.
| National Consumer Price Index | ||||||
|---|---|---|---|---|---|---|
| Apr 2024E | Indices | |||||
| Weight | YoY | MoM | Apr-2024 | Mar-2024 | Apr-2023 | |
| Headline CPI | 100% | 17.02% | -0.70% | 262.60 | 264.46 | 224.41 |
| Food & Non-alcoholic Bev. | 34.58% | 8.40% | -3.50% | 283.10 | 293.36 | 261.17 |
| Alcoholic Bev.& Tobacco | 1.02% | 3.28% | 0.00% | 365.80 | 365.8 | 354.17 |
| Clothing & Footwear | 8.60% | 16.35% | 2.09% | 232.89 | 228.13 | 200.17 |
| Housing, Water, Electricity, Gas & Fuels | 23.63% | 38.83% | 0.48% | 245.42 | 244.24 | 176.77 |
| Furnishing & Household Equipment Maintenance | 4.10% | 17.36% | 0.00% | 265.47 | 265.47 | 226.2 |
| Health | 2.79% | 18.82% | 0.43% | 237.71 | 236.68 | 200.06 |
| Transport | 5.91% | 12.04% | 2.43% | 319.01 | 311.46 | 284.74 |
| Communication | 2.21% | 13.30% | -1.01% | 133.47 | 134.83 | 117.8 |
| Recreation & Culture | 1.59% | 9.76% | -1.05% | 253.98 | 256.67 | 231.4 |
| Education | 3.79% | 11.82% | 1.40% | 190.12 | 187.5 | 170.02 |
| Restaurants & Hotels | 6.92% | 18.71% | 0.49% | 267.66 | 266.35 | 225.48 |
| Miscellaneous | 4.87% | 17.49% | 0.23% | 277.45 | 276.81 | 236.14 |
The decrease in monthly inflation is largely driven by a significant fall in Food index.
This is primarily attributed to the deflated prices of Tomatoes, Fresh Vegetables, Onions, and Wheat.
Meanwhile, the clothing, housing, and transport index is anticipated to increase marginally mainly due to Eid, quarterly rent adjustment, increase in fuel prices, and electricity charges.
Inflation Sensitivity
Continuing the disinflation trend, consumer prices will experience an even sharper downward trend from June onwards due to a high base.
If consumer prices rise an average 0.5% a month going forward, annual inflation will drop to about 18.1% by the end of June and 8.4% by December.
With a 1% monthly increase, annual inflation will fall to about 19.8% by June and 13.3% by December.
Meanwhile, with an average monthly increase of 1.58%, which is the last 12-month average, annual inflation will stand at 21.9% by June and 19.4% 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 1.58%
Copyright Mettis Link News
Posted on: 2024-04-26T12:30:58+05:00
