CPI Preview: November's inflation likely to clock in at 4.6%

November 30, 2024 (MLN): The headline inflation for November is expected to settle at 4.6%YoY compared to 7.2% YoY in the last month and 29.2% YoY in November 2023.

This is almost a tenth of where the rate was at the peak 1.5 years ago.

The number is expected to ease to the lowest level in six years in November after an uptick last month as food and transport costs fell from a year ago.

Such a reading would mark the smallest annual gain in consumer prices since April 2018. That would likely keep the central bank leaning toward another 150 basis point rate cut at next month’s policy meeting.

This will take the average inflation of 5MFY25 to 7.9% YoY compared to 28.6% YoY in 5MFY24.

On a sequential basis, the CPI would likely surge by around 0.3% amid a jump in housing and transport prices compared to the 1.3% MoM increase in October 2024.

The housing index is likely to climb 0.9% from October, driven by an increase in LPG prices. However, the increase is limited by a negative fuel charge adjustment (FCA) and the PBS still does not account for the significant changes in electricity base tariffs.

Weekly PBS data show that electricity consumers paid less this year in November than a year ago.

The government had given consumers a three-month subsidy of up to 200 units to pause the increase in electricity prices, which ended in September. However, PBS has not yet reversed this subsidy.

Transport costs are also expected to rise 1.2% month-on-month due to increased petrol and diesel prices. Despite this, the transport index will remain lower by 2.5% than last year as a sharp decline in global oil prices and a stable exchange rate allowed the government to cut fuel prices.

Food inflation is anticipated to rise by 0.4% in both MoM and YoY. This increase is primarily attributed to a 0.15% MoM uptick in wheat flour prices, alongside significant price hikes in Tomatoes (20.43%), eggs (12.95%), cooking oil (2.49%), pulse moong (7.47%), and Fresh fruits (6.95%).

Conversely, prices for chicken, onions, sugar, and pulse Mash are expected to decline by 15.74%, 3.54%, 2.46 and 3.56% MoM, respectively.

Going forward, inflation to remain subdued supported by a high base effect and stable exchange rate.

To note, the adjustments in electricity subsidy for lower slabs were not fully reflected in last month's CPI data, which could impact inflation.

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