March 2024 Inflation Hits 21-Month Low in Pakistan

March 2024 Inflation Hits 21-Month Low in Pakistan

Karachi, April 1, 2024 – Pakistan saw a significant decline in headline inflation based on the Consumer Price Index (CPI) in March 2024, marking a 21-month low as it stood at 23.68 percent year on year (YoY).

This figure represents a decrease from the 23.06 percent YoY recorded in February 2024, signifying positive developments in the country’s inflationary landscape.

Analysts at Topline Securities Limited noted that this is the lowest inflation rate witnessed in 21 months, down from a peak of 37.97 percent observed in May 2023. The moderation in inflationary pressures reflects various factors, including policy interventions and changes in consumer behavior.

On a month-on-month (MoM) basis, CPI inflation increased by 1.7 percent in March 2024, compared to a flat rate in February 2024. However, this MoM rise is lower than the average increase of 1.8 percent observed over the last 12 months.

In the first nine months of fiscal year 2023-24 (9MFY24), the average inflation rate stood at 27.06 percent, slightly lower than the 27.26 percent recorded in the same period of the previous fiscal year (9MFY23).

Core inflation, measured by non-food non-energy (NFNE) indicators, showed a decline in both urban and rural areas. In urban areas, core inflation fell to 12.8 percent YoY in March 2024 from 15.5 percent YoY in the previous month. Similarly, in rural areas, core inflation decreased to 20.0 percent YoY in March 2024 from 21.9 percent YoY in February 2024. However, on a MoM basis, core inflation in both urban and rural areas showed mixed trends, with urban inflation falling slightly and rural inflation increasing marginally.

Food inflation experienced a noticeable uptick in March 2024, rising by 2.91 percent MoM. This increase was driven by higher prices for tomatoes, onions, potatoes, fresh fruits, and fresh vegetables, among other food items. On a YoY basis, food inflation was primarily influenced by significant increases in the prices of tomatoes, onions, fresh vegetables, condiments & spices, and gur (jaggery).

The Housing, Water & Electricity index, which contributes 24 percent to the CPI, saw a substantial YoY increase of 36.60 percent in March 2024. On a MoM basis, this index rose by 1.50 percent, attributed to an increase in the monthly fuel charges adjustment in electricity tariffs.

The Transport index, comprising fuel prices, experienced a slight decrease of 0.15 percent MoM, while registering a YoY increase of 11.16 percent in March 2024.

Looking ahead, analysts anticipate that CPI inflation in the coming months will continue to decline and may fall below 20 percent, primarily due to the high base effect of the previous year. Despite recent increases in petrol prices, projections suggest that average inflation for fiscal year 2024 will hover around 25 percent, indicating cautious optimism regarding inflationary trends in the near term.