Initial Preview: Inflation to fall below 5% in Nov

November 16, 2024 (MLN): Pakistan’s inflation 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.

The figures, scheduled to be published December 02 by the Pakistan Bureau of Statistics, will probably show the consumer price index rose 4.6% in November over the prior year — almost a tenth of where the rate was at the peak 1.5 years 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.

On a monthly basis, inflation is forecast to rise 0.3% amid a jump in housing and transport prices.

The housing index is likely to climb 0.8% 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 not accounting 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.

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

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

Meanwhile, food inflation has likely remained stable, as a decline in the prices of chicken, sugar, and onions has offset the increase in the prices of eggs, oil, potatoes, and tomatoes.

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