CPI 2023 expected at 21.4% on higher energy prices

Karachi, August 02, 2022: Following the enormous 6.3% MoM spike in June CPI, the July 2022 witnessed another massive sequential increase of 4.35%, taking July reading for YoY CPI to 24.9%.

The YoY reading touched its highest level since Oct-2008 (25%). The July’s CPI readings have pushed the base even higher, where potential cost pressures may now keep CPI above 20% till May-2023, albeit peaking in Aug-2022.

This incorporates increase in Power tariff, gradual increase in PDL & GST and MoM increase of 0.7% (higher than historical average of 0.6% MoM incorporating second round of inflation from higher energy costs and sharp PKR devaluation) leading to CPI averaging over 21% in FY23.

These levels would be a multi-year high as the last time Pakistan witnessed CPI readings of similar levels on an annual basis was in FY09 (20.8%), and before that in the mid-1970s.

Jul-2022 CPI touches 14-year high at 24.9%

CPI for Jul-2022 once again surpassed street estimates (23%), clocking in at 24.9% YoY, touching the highest level since Oct-2008 (25%).

With a MoM increase of 4%, the key reasons of the high inflation reading were: impact of higher POL product prices; quarterly Housing index; and ongoing sticky food inflation.

This time, non-perishable food items led inflation in the Food basket. Food inflation clocked in at 27%/30% for Urban/Rural regions, respectively.

The Urban Non-Food Non-Energy (NFNE) inflation reading for the month continued an upward trajectory, clocking in at 12%, while Rural NFNE reported double-digit inflation an even higher pace of 14.6%.

The wholesale price index (WPI), the indicator measuring price trends of goods before sold at retail, further increased by 2% MoM, taking the YoY change to 38.5%.

“We re-iterate indication of second round of inflation form these readings, which may also impact financial health of the SME & Commercial segment if all cost pressures are not passed on to the consumer prices,” said Amreen Soorani at JS Research.

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