The Consumer Price Index (CPI) inflation saw a 31-month low in May 2024, dropping to 11.8% year-on-year, down from 17.3% in April 2024 and 38.0% in May 2023.
According to the latest data released by the Pakistan Bureau of Statistics (PBS), CPI inflation decreased 3.2% on a month-on-month basis, compared to a 0.4% decrease in April 2024 and a 1.6% increase in May 2023.
According to IMS Research, the key driver of the sharp decline in the headline CPI is lower food inflation (down 6-7% MoM) – which in turn is largely due to a 27% YoY decline in wheat prices.
Much of the decline in domestic wheat prices came through in May as prices fell 20% MoM, amid rebounding domestic production and cheaper imports (wheat and related products constitute 4/7% of the urban/rural CPI baskets), the brokerage firm said in its note.
PBS data shows that urban CPI inflation rose to 14.3% year-on-year in May 2024, down from 19.4% in April 2024 and 35.1% in May 2023. The month-on-month urban CPI inflation decreased by 2.8%, compared to a 0.1% decrease in April 2024 and a 1.5% increase in May 2023.
Rural CPI inflation increased to 8.2% year-on-year in May 2024, down from 14.5% in April 2024 and 42.2% in May 2023. The month-on-month rural CPI inflation decreased by 3.9%, compared to a 0.9% decrease in April 2024 and a 1.7% increase in May 2023.
As per PBS report, the Sensitive Price Indicator (SPI) inflation rose to 15.3% year-on-year in May 2024, down from 21.6% in April 2024 and 43.0% in May 2023. On a month-on-month basis, SPI inflation decreased by 4.0%, compared to a 0.7% decrease in April 2024 and a 1.3% increase in May 2023.
The Wholesale Price Index (WPI) inflation increased to 9.9% year-on-year in May 2024, down from 13.9% in April 2024 and 32.8% in May 2023.
On a month-on-month basis, WPI inflation decreased by 2.5%, compared to a 0.7% decrease in April 2024 and a 1.0% increase in May 2023.
In food category, a month-over-month price increase was observed in May for Potatoes (14.73%), Meat (4.06%), Beans (3.91%), Eggs (1.60%), Vegetable Ghee (1.27%), Cooking Oil (1.26%), Pulse Mash (1.06%), Gram Whole (0.63%), Milk Fresh (0.60%), Sugar (0.59%).
Whereas a MoM price decline was observed in May for Tomatoes (51.23%), Onions (51.15%), Chicken (35.28%), Wheat (22.17%), Wheat Flour (20.12%), Fresh Fruits (8.06%), Fresh Vegetables (7.73%).
In the non-food category, prices decreased for dental services (14.64%), doctor clinic fee (5.48%), transport services (3.35%), hospital services (2.73%), textbooks (2.33%).
Prices decreased for liquified hydrocarbons (9.45%), electricity charges (4.50%), motor fuel (3.18%), and communication apparatus (2.35%).
On a yearly basis, prices of Onions increased by 86.64%, Tomatoes by 55.46%, Condiments and Spices by 39.17%, Beans by 30.89%, Fish 29.64%, Fresh Vegetables by 29.26%, Beverages by 23.55%.
On a YoY basis, prices of wheat decreased by 29.06%, wheat flour (28.48%), Chicken (22.30%), Cooking Oil (19.39%), and Fresh Fruits (18.20%).
The brokerage firm anticipates that due to considerable disinflation from a peak of 38% in May 2023, the SBP may be encouraged to commence monetary easing from the June MPC, even in the face of a tough FY25 Budget.
