Karachi
Pakistan witnessed a significant decline in headline inflation based on the Consumer Price Index (CPI) in March 2024, reaching a 21-month low at 23.68 per cent year on year (YoY). This marked a decrease from the 23.06 per cent YoY recorded in February 2024, indicating positive developments in the country’s inflationary landscape.
Analysts noted that this is the lowest inflation rate observed in 21 months, down from a peak of 37.97 per cent in May 2023. The moderation in inflationary pressures reflects various factors, including policy interventions and changes in consumer behaviour.
On a month-on-month (MoM) basis, CPI inflation increased by 1.7 per cent in March 2024, compared to a flat rate in February 2024. However, this MoM rise is lower than the average increase of 1.8 per cent observed over the last 12 months.
In the first nine months of fiscal year 2023-24 (9MFY24), the average inflation rate stood at 27.06 per cent, slightly lower than the 27.26 per cent recorded in the same period of the previous fiscal year (9MFY23).
Core inflation, measured by non-food non-energy (NFNE) indicators, exhibited a decline in both urban and rural areas. In urban regions, core inflation decreased to 12.8 per cent year on year (YoY) in March 2024, down from 15.5 per cent YoY in the previous month. Similarly, rural areas saw core inflation drop to 20.0 per cent YoY in March 2024, compared to 21.9 per cent YoY in February 2024.
However, on a month-on-month (MoM) basis, core inflation displayed mixed trends in both urban and rural areas. While urban inflation experienced a slight decrease, rural inflation marginally increased, indicating nuanced dynamics at play within different segments of the economy.
Food inflation saw a notable uptick in March 2024, rising by 2.91 percent month on month (MoM). This increase was propelled by elevated prices for tomatoes, onions, potatoes, fresh fruits, and fresh vegetables, alongside other food items.
On a year-on-year (YoY) basis, food inflation was primarily influenced by substantial increases in the prices of tomatoes, onions, fresh vegetables, condiments & spices, and gur (jaggery). These factors underscore the significant impact of specific commodities on overall food inflation dynamics. Meanwhile the housing, water & electricity index, which contributes 24 percent to the CPI, saw a substantial YoY increase of 36.60 percent in March 2024. The transport index, comprising fuel prices, experienced a slight decrease of 0.15 per cent.
Looking ahead, analysts anticipate that CPI inflation in the coming months will continue to decline and may fall below 20 percent, primarily due to the high base effect of the previous year.