Karachi, April 28, 2023 (PPI-OT): Apr’23 CPI - Inflationary pressures yet to recede

Headline inflation in the country is expected to clock in at ~36.5%YoY in the month of Apr’23, compared to 35.4%YoY in the previous month, taking the FY23TD average to ~28.1%YoY. Our expectations correspond to a 2.4%MoM increase in CPI.

As has been the trend in the recent past, headline inflation is being driven by increases in food prices, culminating into a 45.2%YoY increase in the food index during Apr’23.

Product-wise, according to SPI data released by the PBS, the greatest positive contribution to the index is expected to come from: i) Potatoes ((Up) 32%MoM), ii) Wheat flour bag ((Up) 26.8%MoM), and iii) Bananas ((Up) 25.7%MoM).

The negative contribution during the month came from: i) Onions ((Down) 42.0%MoM), ii) Tomatoes ((Down)20.4%MoM), and iii) Garlic ((Down)7.7%MoM).

As per the recent push from the IMF, energy tariffs in the country have been increased, which are driving the housing index, expected to post a YoY increase of 25.2% in the month of Apr’23.

Inflation is expected to remain elevated on a YoY basis in the last two months of the fiscal year, leading us to forecast an average FY23 inflation of 29.3%YoY. This is in line with the SBP’s target of 27%-29% inflation in FY23.