Pakistan inflation update – CPI rose to 9.2% in October 2021

  • National CPI rose to 9.2% yoy in October 2021, up marginally from 9.0% in September but the index is up 1.9% mom. Unlike in earlier months, where the CPI was led mostly by Food inflation, this month Non-Food inflation (9.7-10%) was higher than Food inflation (8.3%). Urban CPI rose to 9.6% (9.1% in September), while Rural CPI of 8.7% was lower than 8.8% in September. National CPI thus averaged 8.7% during July-October 2021, compared with 8.9% same period last year.
  • Core inflation remained under 7% – at 6.7% for both rural and urban centers – but depicted a sharp 1.0% mom increase (highest mom jump since Jan-Feb 2021). We highlight that core inflation would have been higher had it not been for the modest 2-3% yoy inflation in Education and Communication indices.
  • Both Urban and Rural Food inflation of 9.4% and 7.2%, respectively, were at their lowest levels since January 2021, dragged lower by Perishable food items (potatoes, tomatoes and onions). Notably, the government has been taking preemptive measures to prevent food supply shocks, such as importing wheat and sugar in advance despite good domestic production of both crops.  
  • Transport index was up c.14% led by a sharp increase in Petrol prices (to record levels), while Housing & Utilities index rose c.12% yoy because of large increase in power tariff in the previous month (fuel cost adjustments).


Future CPI readings will be lifted by an impending power tariff hike (of PKR1.39/kWh, c.9% of base tariff), an IMF pre-condition for program resumption, the impact of recent PKR devaluation of 6-7% and potential gas tariff hikes. Petrol prices can be increased by further 10% if the government passes on the international price increases. We estimate the CPI to average between 9-10% during FY22, where the readings could nudge 11-12% toward the end of year. Therefore, the SBP may continue to adopt a cautious stance in the upcoming monetary policy in November (we foresee another 50bps hike in the Policy rate).  

Courtesy – Intermarket Securities Limited. 

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