Pakistan Economy: May’23 CPI – 30%+ readings becoming a norm

· Headline CPI inflation is expected to clock in at 36.7%YoY/0.6%MoM for the month of May’23, compared to the 36.4%YoY/2.4%MoM reported in the earlier month—that would mark the highest YoY inflation reading in at least the past 50 years.

· Inflationary readings are being spearheaded by food inflation, which has a 37.6% weight in the CPI, expected to clock in at 47.3%YoY in May’23.

· Prices of the following foodstuff has increased on a sequential basis: i) Potatoes (↑18.1%MoM), ii) Live Chicken (↑17.7%MoM), iii) Gur (jaggery) (↑11.5%MoM) and iv) Hen Eggs (↑7.7%MoM).

· Following products have witnessed a sequential dip in prices: i) Onions (↓36.4%MoM), ii) Tomatoes (↓21.8%MoM), Garlic (↓8.4%MoM) and Bananas (↓2.7%MoM).

· Housing Index (CPI weight: 23.6%) is projected to be the second largest driver of inflation this time around, wherein we expect the index to post an increase of 21.3%YoY, spearheaded by the increase

· FY24 CPI is expected to average 20.6%YoY, indicating current policy rate being in the mildly positive real interest rate level. Hence, reducing the need for further interest rate hikes.

Courtesy – AKD Research