Pakistan’s Headline Inflation Hits 20-Month Low in February 2024

Pakistan’s Headline Inflation Hits 20-Month Low in February 2024

Karachi, March 1, 2024 – Pakistan’s headline inflation has reached a 20-month low in February 2024, according to analysts at Arif Habib Limited.

The data released by the Pakistan Bureau of Statistics (PBS) revealed that the Consumer Price Index (CPI)-based headline inflation contracted to 23.1 percent, marking a significant decline.

In February 2024, the YoY headline inflation rate stood at 23.1 percent, showing a notable decrease from the previous month, January 2024, which reported a YoY inflation rate of 28.3 percent. Moreover, when compared to the same period in the previous year (February 2023), there was a substantial drop in headline inflation, registering at 31.5 percent YoY during that period.

The surge in inflation during February 2024 was attributed to price increases in various categories. Notable increases were observed in food (18.1 percent YoY), transportation (15.0 percent YoY), housing (36.1 percent YoY), restaurants (22.4 percent YoY), alcoholic beverages and tobacco (66.6 percent YoY), household equipment (25.6 percent YoY), miscellaneous items (24.1 percent YoY), recreation and culture (28.4 percent YoY), and clothing and footwear (20.2 percent YoY).

With the February 2024 figures, the average headline inflation for the 8MFY24 reached 27.96 percent, slightly up from 26.19 percent in the same period last year (SPLY).

On a month-on-month basis, inflation remained unchanged, signifying a deceleration compared to the average MoM rise of 1.93 percent observed over the initial 7MFY24. The transport index saw a 2.1 percent MoM increase, the housing index rose by 1.8 percent MoM, and the food index decreased by 1.6 percent MoM. The decline in the food index was primarily due to lower prices of items such as eggs, onions, tomatoes, oil, and ghee. The housing index surged mainly due to a rise in gas tariffs. Additionally, the transport index remained elevated due to a MoM uptick in petroleum product prices.

Core inflation saw a slight uptick to 18.1 percent YoY (average) in the outgoing month, down from the previous month’s average of 20.5 percent. Urban core inflation, measured by Non-Food, Non-Energy (NFNE) items in February 2024, increased by 15.5 percent YoY, compared to a 17.8 percent increase in the previous month and 17.1 percent in February 2023. Rural core inflation, on the other hand, rose by 21.9 percent YoY in February 2024, compared to an increase of 24.6 percent in the previous month and 21.5 percent in February 2023. On a MoM basis, urban and rural core inflation increased by 0.3 percent and 0.4 percent, respectively.

The significant decline in headline inflation is anticipated to have positive implications for the economy, potentially influencing monetary policy decisions and fostering an environment of relative stability in consumer prices. Investors and policymakers will closely monitor these trends as they navigate the economic landscape in the coming months.