CPI-based inflation jumps in October, clocks in at 26.6%

Consumer Price Index (CPI)-based inflation registered a significant increase in October 2022 and clocked in at 26.6% on a year-on-year (YoY) basis. On a month-on-month basis, it increased 4.7% as compared to a decrease of 1.2% in the previous month, showed data released by the Pakistan Bureau of Statistics on Tuesday.

"CPI inflation General, increased to 26.6% on year-on-year basis in Oct 2022 as compared to an increase of 23.2% in the previous month and 9.2% in Oct 2021," said the PBS.

In June 2022, the inflation reading had crossed the 20% mark, surging to an over 47-year high level of 27.3% in August 2022 on a year-on-year (YoY) basis.

Inflation reading falls slightly in September, clocks in at 23.2%

The inflation reading comes as per market expectations.

Earlier, Ismail Iqbal Securities Limited expected headline inflation to witness a sharp 4% month-on-month increase in CPI Index during Oct 2022.

“We estimate inflation at 25.7% versus 23.2% in September. Overall, we expect FY23 average inflation at 22%. The sequential increase will be led by normalisation of electricity tariff, quarterly house rent revision, and higher perishable food prices,” the brokerage house had said earlier.

“The impact would be diluted to some extent by reduction in petroleum prices,” it added.

Talking to Business Recorder, Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited, said the inflation rate was expected to increase after electricity rates were normalised in October.

“However, the impact of high base effect would kick in next month, and as the government has announced a number of subsidies on several items, while the commodity prices are also decreasing internationally. As a result, inflation pressure would decrease to around 22-23% in November,” he said.

Urban, rural inflation

As per the PBS, CPI inflation in urban areas clocked in at 24.6% on year-on-year basis in Oct 2022 as compared to an increase of 21.2% in the previous month and 9.6% in Oct 2021.

On month-on-month basis, it increased to 4.5% in Oct 2022 as compared to a decrease of 2.1% in the previous month and an increase of 1.7% in Oct 2021.

Moreover, CPI inflation in rural areas hit 29.5% on year-on-year basis in Oct 2022 as compared to an increase of 26.1% in the previous month and 8.7% in Oct 2021.

On a month-on-month basis, it increased to 5.0% in Oct 2022 as compared to an increase of 0.2% in the previous month and an increase of 2.2% in Oct 2021.

Rising inflation has emerged as a key concern for Pakistan's economy, already in the midst of depleting foreign exchange reserves.

In October, the State Bank of Pakistan (SBP) in its Monetary Policy Committee (MPC) kept the policy rate unchanged at 15% as it felt that the existing monetary policy stance strikes an appropriate balance between managing inflation and maintaining growth in the wake of the floods.

“On the one hand, inflation could be higher and more persistent due to the supply shock to food prices, and it is important to ensure that this additional impetus does not spill over into broader prices in the economy. On the other, growth prospects have weakened, which should reduce demand-side pressures and suppress underlying inflation,” MPC said then.

On the other hand, the government, in a late-night development on Monday, announced to keep the price of petroleum products unchanged for the next 15 days.

PBS data suggested that transport, food, housing, and restaurant & hotel groups witnessed the highest pace of inflation in October.