STAFF REPORTER
KARACHI Analysts expect Mar’20 inflation to settle at 10.09% YoY compared to 8.6% in Mar’19 and 12.40% in Feb’20, respectively. The decline in CPI is expected on the back of i) massive reduction in prices of petroleum products by PKR 20/liter (PKR 5/liter at start of the month and PKR 15/liter as announced in economic revival package by Prime Minister to fight against Corona pandemic) in Mar’20, and ii) lockdown announced in key major cities resulting in lower demand of Tomatoes, Fresh Vegetables, and Chicken which might keep the food index muted. Whereas, housing index is expected to witness a drastic increase due to monthly fuel price adjustment which will increase electricity charges by 18% MoM. This will take the 9MFY20 average inflation to 11.53% compared to 6.3% in 9MFY19. On a yearly basis, increase in inflation will likely be led by Alcoholic Beverages & Tobacco (+17.9% YoY), Food (+14.9% YoY), Health (+12.1%YoY), and Miscellaneous (+11.6%). On a MoM basis, CPI reading is expected to decrease by 0.1% attributable to decline in transport index by 12% MoM which cushioned the impact of higher housing (+2.3% MoM) and clothing index (1.1% MoM). As per Sensitive Price Index (SPI) data published by the Pakistan Bureau of Statistics (PBS), average prices of Onions, Potatoes, Eggs and Fresh Fruits are expected to register a jump of 15%, 12%, 7%, and 6% MoM, respectively. While, decline in prices of essential food items like Tomatoes (-17% MoM), Fresh Vegetables (-8% MoM) and Chicken (- 7% MoM) is expected to keep the food index contained. Analysts expect inflationary pressure to augment in the upcoming month due to Ramzan, whereby price hike is triggered by higher demand for essential food items such as Fresh Fruits, Vegetables, Wheat, Chicken and Pulses. On the other hand, we expect quarterly house index to increase by 1.5%, also adding pressure on inflationary readings. Meanwhile, the Federal Government has once again deferred hikes in utility rates (Gas and Electricity) and Prime Minister Khan has ordered strict actions against hoarders amid fears of rising food prices. In addition, reduction in prices of petroleum products will also help keep inflation contained. We anticipate inflation during the month of April’20 to settle in the range of 9.75- 10.25% due to aforementioned reasons and high base effect.
