Pakistan’s inflation expected to return to single digits in July

Pakistan’s headline inflation is expected to return to single digits in July after three consecutive months of double-digit readings, although analysts say the slowdown is largely due to favourable base effects while underlying price pressures remain.

Headline consumer price inflation (CPI) is expected to be above 9% year-on-year in July, compared with 11.1% in June, according to estimates from brokerage houses.

Ismail Iqbal Securities expects headline inflation at 9.3% YoY, saying the return to single digits is “largely base-driven rather than a genuine easing in momentum.”

On a monthly basis, the brokerage expects CPI to rise 1.3%, with the increase “almost entirely food-led”. The food index is projected to rise 4% MoM, led by tomatoes, potatoes, onions, fresh vegetables, chicken and eggs. Wheat and wheat flour are also expected to increase around 5.7% MoM.

Offsetting this, transport is projected to fall 3.4% MoM on a 7.4% decline in motor fuel prices, while housing is expected to ease 0.4% due to lower electricity and LPG charges.

The brokerage, however, expects non-food, non-energy (NFNE) core inflation to edge up to 8.5% YoY in July from 8.4% in June and 7.6% in the same period last year, indicating that “the headline relief is coming from fuel and perishable food, both volatile, while underlying price pressures remain intact.”

Separately, JS Global expects headline CPI at 9.1% YoY in July.

“The primary driver for YoY increase is transport inflation, which is expected to surge 21% YoY amid Middle East tensions and global energy market volatility.

“Similarly, food inflation would also likely be high at 9.1% YoY. Housing inflation is expected at 8.4% YoY with 0.6% MoM growth, while miscellaneous items are expected to climb 11.3% YoY,” it said.