The Wholesale Price Index (WPI) expectedly came down for the third straight month –recorded at 28 percent for November 2022 – lowest since March 2022. The fiscal year average at 36 percent is still comfortably clear of the same period last year by over 15 percentage points. On trailing 12-month basis, the WPI at 31 percent is still highest ever – nearly double from 16 percent in the same period last year.
The high base has started to kick in and is going to be more pronounced from here on, as November’s 2022 already comes on the back of 27 percent in November 2021 – which was a 13-year high. The CPI has usually followed the WPI, and while the WPI may well have peaked as indicated earlier in this space, the same cannot be said with surety for the CPI.
Energy price adjustments have been made to a great degree, with minor adjustments on HSD left. Considering the oil price stays around current levels, there will be an uptick in prices of transportable goods, and more pronounced as HSD has a higher weightage in WPI composition, and arguably, a higher indirect impact on all transportable goods. The government has little room to maneuver in terms of levying higher PL on HSD, as IMF has shown enough leeway on the matter.
The gas crisis is back with the drop in temperature, but the government has so far refrained from rationalizing consumer end tariff. The tariff determinations sitting with the regulator has massive tariff increase in store – which could be as high as 100 percent for industries. Should that happen (given the IMF pressure mounting), the gas and electricity WPI sub-index could well stay in double-digits for 2HFY23.
A significant jump has been observed in machinery prices – contributing more to the overall increase than the food or agriculture indices, with a much lower weightage in the overall basket. Whether or not it is a one-off jump or the impact of import restrictions is not known for sure. What is for sure is that Pakistan’s dollar crisis is real, and import restrictions are not being eased anytime soon. Another round of currency depreciation is not too far away and continued forced import compression is likely to keep the pressure on prices high.
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