Inflation projected to be at 28.6% in August, says brokerage house

Headline inflation is expected to move further up in August, higher than the 28.3% recorded in July, brokerage house Arif Habib Limited (AHL) said.

“The headline inflation for the month of August 2023 is projected to be 28.6% on a YoY basis. This is a slight increase compared to the previous month, July 2023, which had inflation rate of 28.3% YoY,” said AHL in its report on Monday.

On a yearly basis, the increase is significant compared to 27.3% recorded in the same period last year. “With this, 2MFY24 average CPI is expected around 28.4% YoY compared to 26.1% YoY,” it said.

The brokerage house projected monthly inflationary pressures to persist with an expected increase of 2.7% MoM.

“Specifically, food inflation is expected to contribute significantly to this trend,” AHL said, adding that prices of perishables including rice, vegetables, tomatoes, eggs, sugar, gur, and spices are expected to be higher in August.

“As a result, the food inflation rate is projected to increase by 4.1% MoM, leading to a YoY jump in the food index to 43.4%.”

Moreover, the transportation index is anticipated to rise by 7.8% MoM and 22.8% YoY, the brokerage house shared.

“This increase can be attributed to authorities raising domestic prices of petroleum products in the outgoing month (August). The prices of LPG (liquefied petroleum gas), solid fuel, and electricity charges are also expected to contribute to this trend.”

AHL projected that going forward, the primary factors posing risks to overall inflation include an “escalation in food and energy costs (with an impending gas tariff adjustment), potential consequences of budgetary actions, and the susceptibility stemming from depreciating PKR against the greenback.”