Karachi: Pakistan's Consumer Price Index (CPI) registered at 12.6% for June 2024, marking a notable decrease from 29% a year earlier and bringing the FY24 average CPI to 23.9%. Despite a monthly uptick in June, the annual inflation rate has softened significantly due to several factors, including a high base effect and consecutive month-on-month declines earlier in the year.
According to JS Global, the key contributors to the decline in June's CPI were lower prices for heavy-weight items such as petroleum products, wheat, and eggs, each showing significant reductions. Food inflation remained stable this month, a rare occurrence in Pakistan's economic landscape, where food prices typically stay high. The overall food price index is currently 6% lower than in December 2023, while the transport index has only decreased by 2% in the same period. Looking ahead to FY25, the budget includes new measures that are expected to influence inflation trends, notably the imposition of a sales tax on branded milk and corporate dairy, which is projected to drive up milk prices significantly.
JS Global's analysis predicts an increase in the FY25 average CPI to 12%, adjusting from an initial forecast of 11% due to the new milk tax. This tax is expected to cause an 18% month-on-month spike in milk prices in July 2024 alone. Additionally, July will see further price increases in petroleum products, power, and gas, which are anticipated to contribute to an overall CPI jump. The forecast for real interest rates remains robust, with an expectation of maintaining a positive margin through FY25 despite potential spikes in inflation.