Pakistan’s headline inflation increases pace, clocks in at 12.6% in June 2024

Pakistan’s headline inflation clocked in at 12.6% on a year-on-year basis in June 2024, the Pakistan Bureau of Statistics (PBS) said on Monday, higher than the reading in May when it stood at 11.8%. On a month-on-month basis, the reading increased to 0.5%.

“This came is line with our expectation,” said brokerage house Topline Securities.

The latest CPI figure takes FY24 average inflation to 23.4% compared to 29.2% in FY23.

The inflation reading was also in line with the government’s expectations.

On Friday, the Ministry of Finance, in its ‘Monthly Economic Update and Outlook’ report, had projected a slightly increased inflation outlook for June 2024 compared to the previous month but said that it remains well below the levels of the same month last year.

“This rise is primarily due to higher prices of perishable items driven by Eid ul Adha,” it said.

The ministry said that by managing supply and demand, the government aims to stabilise prices and mitigate market volatility, presenting a more optimistic inflation outlook.

Meanwhile, the inflation figure was also in line with projections made by a number of brokerage houses as well.

JS Global expected CPI to clock in “at 12.5% YoY (bringing FY24 average to 23.8%), continuing a lower trend that started from last month (11.8%) compared to 17.3% recorded in April-2024 and a significant decline from 29.4% in Jun-2023.”

Meanwhile, in a separate report, AKD Securities Limited, another brokerage house, projected inflation to register a 12.55% YoY increase against 11.76% YoY in the previous month.

Urban, rural inflation

The PBS said CPI inflation urban clocked in at 14.9% on year-on-year basis in June 2024, an increase of 14.3% in the previous month and 27.3% in June 2023.

On a month-on-month basis, it increased to 0.6% in June 2024 as compared to a decrease of 2.8% in the previous month and an increase of 0.1% in June 2023.

CPI inflation rural increased to to 9.3% on year-on-year basis in June 2024 as compared to an increase of 8.2% in the previous month and 32.4% in June 2023.

On month-on-month basis, it increased to 0.3% in June 2024 as compared to a decrease of 3.9% in the previous month and decrease of 0.8% in June 2023.

SBP expectations

In its previous meeting, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) had decided to reduce the key policy rate by 150 basis points (bps), taking it to 20.5%. This was the first cut in the key policy rate in four years.

In its statement, the MPC said that while the significant decline in inflation since February was broadly in line with expectations, the May outturn was better than anticipated earlier.

“The MPC assessed that underlying inflationary pressures are also subsiding amidst a tight monetary policy stance, supported by fiscal consolidation,” it said.

“This is reflected by continued moderation in core inflation and ease in inflation expectations of both consumers and businesses in the latest surveys.

“At the same time, the MPC viewed some upside risks to the near-term inflation outlook associated with the upcoming budgetary measures and uncertainty regarding future energy price adjustments.”

The MPC back then noted that the cumulative impact of the earlier monetary tightening is expected to keep inflationary pressures in check.