Consumer Price Index (CPI)-based inflation in November is expected to hit 28.26%, higher than 26.9%recorded in October, due to a rise in gas prices, said brokerage house JS Global on Thursday.
“We believe CPI readings for Nov-2023 would broadly be subjected to gas price used in the monthly index calculation,” said the brokerage house.
“We expect CPI for Nov-2023 to clock in at 28.26%, with MoM increase of 1.86%. Having said that, the 1% weighted head item can take the headline CPI anywhere between 27% - 30%,” it added.
JS Global highlighted that the expected range was calculated after publication of the recent SPI data that reported gas prices at Rs1,700/mmbtu, a jump of 480%.
“While weighted average of residential gas prices have not witnessed an increase of this quantum, one of the explanations for the massive increase would be incorporation of increase in fixed charges in gas utility bills in the said price increase,” it explained.
On October 23, the interim government approved a substantial increase in natural gas tariff by up to 193% to meet one of the conditionalities of the International Monetary Fund (IMF).
The interim government repeatedly stated the revision of gas price has been pending since July 1, 2023, which was not done and resulted in a revenue shortfall of Rs46 billion for the period July to September 2023, and in case of inaction, it will reach Rs395 billion by June 2024. It had said that the diversion of RLNG would result in a deficit of Rs210 billion in the current winter.
Following the approval, the Oil and Gas Regulatory Authority (Ogra) in accordance with the policy guidelines of the federal government notified the natural gas sale prices effective from November 1, 2023.
However, JS Global in its report said despite the gas rates hike a decline in POL product prices would bring some respite in November.
“The remaining 4% decline in prices of POL products is expected to reflect this month, following a 4% decline in the preceding month,” it said.
“On the other hand, albeit on an increasing trend, the pace of food inflation is expected to remain relatively slower at 100bp MoM, compared to the average ~250bp/month witnessed in CY23 YTD, owing to a breather in fuel prices and a decrease in pressure from WPI (Wholesale Price Index),” it added.
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