Inflation falls to two-year low at 17.3pc in April

ISLAMABAD: Pakistan’s benchmark monthly inflation rate, as measured by the Consumer Price Index (CPI), declined for the fourth consecutive month, settling at 17.3 percent year-on-year in April 2024, down from the previous month’s 20.68 percent, according to the Pakistan Bureau of Statistics (PBS).

This marks a significant decrease from the multi-decade high of 38 percent recorded in May 2023.

April’s reading is also the lowest since May 2022 when it was recorded at 13.8 percent.

Likewise, on a month-on-month basis, the CPI decreased to 0.4 percent in April 2024 as compared to an increase of 1.7 in the previous month and an increase of 2.4 percent in April 2023.

Apart from the general inflation decline, the core inflation (excluding food and energy costs) also moderated and was recorded at 13.1 percent in April 2024, against 19.5 percent in April 2023. In March 2024, it was at 12.8 percent.

From 2010 to 2024, the core inflation rate fluctuated, reaching an all-time high of 20 percent in May 2023 and a record low of 3.40 percent in September 2015.

The fall in general inflation, especially of core inflation, makes a strong case for the central bank to downward revise its discount rate.

On April 29, the State Bank’s Monetary Policy Committee (MPC) opted to keep the benchmark policy rate at a record high of 22 percent for the seventh consecutive time.

It is to be noted that in March 2024, after 37 months, the real interest rate (current interest rate minus inflation) turned positive. Now in April too, it remained positive at 4.7 percent.

The PBS data further reported urban inflation at 19.4 percent and rural at 14.5 percent in April 2024. In the previous month, urban inflation was at 21.9 percent, and rural at 19 percent.

Notably, for the first 10 months of the fiscal year (July-April 2023-24), average inflation stood at 25.97 percent against 28.23 percent in the same period of the last fiscal.

Inflationary deceleration stems predominantly from moderated price increments in key sectors including food and non-alcoholic beverages which arrived at 9.7 percent against 17.2 percent in the previous month, housing and utilities at 35.7 percent against 36.6 percent, Leisure & Cultural Affairs expenses at 11.8 percent against 24.7 percent and health expenses at 18.6 percent in April against 19.6 percent in March.

Likewise, homecare maintenance cost was reduced to 17.78 percent against 20.56 percent, and communication charges to 14.47 percent from 14.6 percent.

Conversely, clothing & footwear became expensive by 19.1 percent in April against 16.1 percent in March, transport by 12.5 percent against 11.2 percent and restaurants & hotels by 19.5 percent against 18.9 percent in the previous month.

Education expenses also increased to 15.4 percent from 12.34 percent in March 2024.

Moreover, the wholesale price index (WPI), a measure of producer prices, arrived at 13.88 percent in April from 14.8 percent in March and 33.4 percent in April 2023. The sensitive price indicator (SPI), which tracks the prices of essential items on a weekly basis, was recorded at 21.6 percent against 25.9 percent in March 2024.

Prices for various commodities experienced significant fluctuations on a month-on-month basis, according to the recent data.

A notable increase of 21.4 percent was seen in chicken prices, followed by fish at 2.5 percent, potatoes at 2.3 percent, meat at 1.9 percent, milk powder at 1.3 percent, and bakery and confectionary prices increased by 1.04 percent over the previous month.

Conversely, some items witnessed price decreases, including onions at 15.6 percent, fresh vegetables at 12 percent, wheat at 10.4 percent, wheat flour at 10 percent, tomatoes at 6.2 percent, eggs at 4.3 percent, pulse gram at 1.2 percent, pulse masoor, sugar, and fresh fruits by one percent each. Whereas, besan gram whole, wheat products, gur, condiments, and spices prices were reduced by less than a percent.

In the non-food sector, footwear prices increased by 17.16 percent, cotton cloth by 9.7 percent, woolen cloth by 3.8 percent, motor fuel by 3.6 percent, dupatta by 3.6 percent, marriage hall charges by 2.6 percent, education 2.34 percent, personal grooming services 2.1 percent, transport services 1.5 percent, house rent 1.45 percent, and recreation and Culture by 1.26 percent. Whereas, electricity charges decreased by 9.5 percent, liquefied hydrocarbons by 0.6 percent, and construction input items by 0.12 percent.

On a year-on-year basis, significant price hikes were seen in various food items, with onions 156.16 percent, tomatoes 126.67 pc, condiments and spices 46.3 pc, gur 35.99 pc, chicken 33.62 pc, beans 29.64 pc, fish 28.41 pc, pulse mash 25.32 pc, fresh vegetables 25.08 pc, beverages 24.60 pc, dry fruits 24.01 pc, meat 22.18 pc, milk powder 21.26 pc, sweetmeat 21.09 pc, pulse masoor 19.67 pc, readymade food 17.26 pc, pan prepared 16.14 pc, sugar 15.06 pc, nimco 14.43 pc, milk products 13.28 pc, bakery and confectionary 13.09 pc, wheat products 11.49 pc), rice 10.78 pc, butter 10.31 pc, milk fresh 10.26 pc, potatoes 9.67 pc, and pulse moong 9.62 pc.

Among the non-food group, gas charges were up by 319 percent, electricity charges 71 percent, accommodation services by 31.5pc, transport services by 26.7pc, cotton cloth 23pc, drugs & medicines by 22.78pc and footwear by 21.4pc.

Conversely, cooking oil prices decreased by 21 percent, vegetable ghee 17.8pc, mustard oil by 15.4pc, fresh fruits by 13.9pc, wheat 11pc, wheat flour by 4.7pc, eggs by 3.6pc and gram whole by 0.4 percent over the same month prices of last year.

Meanwhile, Prime Minister Shehbaz Sharif declaring the downward trend of inflation as a welcome news for the people, said that the inflation falling towards the lowest level in two years was a sign of improvement in the economy.

“This is the result of the hard work done during the 16-month government led by the Pakistan Democratic Movement (PDM) and continued by the interim government,” he said in a statement issued by the PM Office.

The prime minister pointed out that the inflation rate had come down from the peak of 39 percent to 20 percent last month and then to 17 percent in the current month.

He said bringing down the inflation rate was the top priority of the government. “With the support of Allah Almighty, the people will get more relief in coming days after increase in the economic activities.”

He expressed the hope that the people might also get more relief by further cut in the petroleum prices which were on the downward trend in the international market.

The prime minister directed the provincial governments to ensure that impacts of fall in the petroleum prices reach the common people, besides taking special measures for the implementation of the rates of food items fixed by the federal government.

“With the blessings of the Almighty, the life standard of the people will further improve with further improvement in the economy,” he said.

The government was trying its best to provide maximum relief to the people, the prime minister added.