Karachi, September 24, 2024 – Pakistan’s headline inflation, based on the Consumer Price Index (CPI), is projected to decrease to 7.3% year-on-year (YoY) in September 2024, marking its lowest level since January 2021. This is a significant improvement compared to both August 2024, when inflation stood at 9.6% YoY, and September 2023, when the inflation rate surged to 31.4% YoY.
The decline signals a strong reversal of the inflationary pressures that had gripped Pakistan in recent years. According to a research report from Arif Habib Limited, the trend of single-digit inflation is expected to persist in the near term. For the first quarter of the fiscal year 2024-25, the average CPI is anticipated to be around 9.3% YoY, a stark contrast to the 29.0% YoY average recorded during the same period last year.
The drop in inflation can be attributed to several factors, including a high base effect, declining global commodity and energy prices, and relative stability in the Pakistani rupee’s exchange rate. Analysts believe that these factors will continue to support a disinflationary trend in the months ahead, providing some relief to consumers and policymakers.
On a month-on-month (MoM) basis, inflation in September 2024 is projected to decline slightly by 0.2%. A key contributor to this decline is the food index, which is expected to fall by 0.3% MoM due to lower prices for essential food items such as wheat, tomatoes, chicken, and fresh fruits. The report also highlights that the transport index is projected to decrease by 2.8% MoM, driven largely by a reduction in petroleum product prices. Additionally, the housing index is forecasted to drop by 0.7% MoM, reflecting lower electricity charges due to fuel cost adjustments (FCA).
These positive developments in key sectors of the economy, including food, transport, and housing, are expected to mitigate the inflationary pressures that had previously driven up prices for everyday consumers.
Looking forward, economic analysts remain cautiously optimistic about the inflation outlook. With the high base effect from last year, the continued decline in global commodity and energy prices, and stable exchange rates, Pakistan is poised for further disinflation in the coming months. However, global economic uncertainties and domestic challenges could still impact the inflation trajectory.
Overall, the projected decline in inflation offers some breathing space for consumers, as the government and policymakers seek to maintain stability in prices, particularly for essential goods and services.
