Karachi, December 28, 2023 – Analysts at Arif Habib Limited have projected that the headline inflation for December 2023 is likely to clock in at 28.4 percent, indicating a slight deceleration from the previous month’s figure.
In a comprehensive report, the analysts delved into the factors influencing the inflationary trends and provided insights into the economic landscape for the closing month of the year.
The Year on Year (YoY) headline inflation rate for December 2023 is anticipated to be 28.4 percent, reflecting a marginal decrease from November 2023, which reported a YoY inflation rate of 29.2 percent. Despite this decrease, when compared to the same period in the previous year (December 2022), a notable increase in headline inflation is expected, as it stood at 24.5 percent YoY during that timeframe.
The analysts further predict that the average Consumer Price Index (CPI) for the first half of the fiscal year 2023-24 (1HFY24) will hover around 28.6 percent YoY, marking an uptick from the 25 percent YoY rate recorded in the corresponding period the previous year.
In terms of core inflation, December 2023 is expected to witness an average of 20.8 percent on a YoY basis, representing a slight decline from the 21.8 percent reported in the previous month. The core inflation rate excludes volatile items such as food and energy to provide a clearer picture of underlying price trends.
With the December 2023 figures, the headline CPI for the entire calendar year is projected to exhibit a YoY growth of 30.8 percent. This contrasts with the 19.7 percent recorded in the previous year, underlining the persistent inflationary pressures facing the economy.
Breaking down the December 2023 projections, a Month on Month (MoM) decrease of 0.17 percent is anticipated. This stands in stark contrast to the average MoM increase of 2.2 percent observed over the first five months of fiscal year 2023-24. The decrease in monthly inflation is attributed to declines in the food index (-0.1 percent MoM), transport index (-2.4 percent MoM), and housing index (-0.9 percent).
The decline in the food index is primarily influenced by lower prices of items such as fresh vegetables, onions, and potatoes. The transport index is expected to decrease due to a MoM decline in High-Speed Diesel prices, while the housing index is likely to decrease primarily because of a decline in electricity charges on a MoM basis.
Looking ahead, analysts anticipate a gradual moderation in overall inflation in the coming months. However, they caution against potential risk factors that could impact these projections, including the volatility in food and energy prices, the possibility of another gas tariff adjustment in January 2024, albeit of a reduced magnitude, and the potential depreciation of the Pakistani Rupee (PKR) against the US Dollar. As economic dynamics continue to evolve, stakeholders will closely monitor these factors to gauge their impact on the inflationary trajectory in the upcoming year.
