Karachi, May 31, 2023 (PPI-OT): 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 ((Up) 18.1%MoM), ii) Live Chicken ((Up) 17.7%MoM), iii) Gur (jaggery) ((Up) 11.5%MoM) and iv) Hen Eggs ((Up) 7.7%MoM).

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