Karachi, November 02, 2021 (PPI-OT): CPI print for Oct’21 clocks in at 9.2%

Headline CPI for Oct’21 clocked in at 9.2%, higher than consensus of 8.6% and Sep’21 inflation of 9.0%. The higher print during the month is primarily on account of higher-than-expected food and fuel inflation as well as the quarterly house rent index adjustment. Cumulatively, the 4MFY22 average inflation now stands at 8.74% against 8.87% during SPLY.

After posting nearly two months of lower levels, core inflation jumped to 6.7% for both urban and rural from previous print of 6.4% and 6.2%, respectively. This garners attention for rise in inflationary expectations.

The broader index of inflation has now accounted for the mid-Oct’21 hike in POL product prices and similar impact is visible in food inflation. We believe, government’s recent move to keep additional hike in POL product prices on hold will simmer the sequential rise in fuel inflation, going forward.

After intervening the domestic market to bring down food inflation, the government has attempted to keep fuel prices unchanged despite increase in international oil prices and devaluation of Rs against US$. The electricity tariff adjustment of Rs1.39/unit is yet to be priced in and it continues to make a case for the second-round impacts on inflation.