Analysts Anticipate Inflation Easing to 27.3% in January 2024

Analysts Anticipate Inflation Easing to 27.3% in January 2024

Karachi, January 29, 2024 – Analysts from Arif Habib Limited are forecasting a decline in the year-on-year (YoY) headline inflation rate for January 2024 to 27.3%.

This projection indicates a drop from the YoY inflation rate reported in December 2023, which stood at 29.7%. In comparison to the same period in the previous year (January 2023), a marginal decrease in headline inflation is expected, as it recorded at 27.6% YoY during that time.

The projected average Consumer Price Index (CPI) for the first seven months of FY24 is estimated to be around 28.6% YoY, contrasting with the 25.4% YoY rate recorded in the corresponding period the previous year.

For January 2024, the average core inflation is expected to be 20.2% on a YoY basis, reflecting a decline from the previous month’s figure of 21.3%.

Projections for January 2024 suggest a month-on-month (MoM) increase of 0.98%, contrasting with the average MoM increase of 1.95% observed over the first six months of FY24. The rise in monthly inflation is attributed to increases in the food index (+1.7% MoM) and housing index (+1.9% MoM), while the transport index is anticipated to decrease MoM (-3.0%). Higher prices of items such as onions, tomatoes, chicken, and eggs contribute to the increase in the food index, while a quarterly house rent adjustment is expected to boost the housing index. Conversely, a MoM decrease in petroleum product prices is likely to lead to a decline in the transport index.

Looking ahead, there is an expectation of a downward trajectory in overall inflation, driven by the high base effect. However, analysts emphasize the need to acknowledge potential risk factors that could impact these projections. These include volatility in food and energy prices, the possibility of another gas tariff adjustment in February 2024 (albeit of a reduced magnitude), and the potential depreciation of the Pakistani Rupee (PKR) against the USD. These factors underscore the importance of monitoring economic indicators closely to navigate potential challenges and uncertainties in the coming months.