Pakistan Economy: Headline inflation to drop to 12.6%YoY in Feb’20, (AKD Daily, Feb 19, 2020)
Pakistan Economy: Headline inflation to drop to 12.6%YoY in Feb’20
- Following a steep jump in Jan’20, national headline inflation is likely to decelerate to 12.6%YoY in Feb’20 vs. 9yr high of 14.6%YoY in the preceding month and 6.8%YoY in Feb’19. Sequentially, the National CPI index is expected to slip 0.8%MoM.
- Cosmetic measures (i.e. delay in monthly fuel adjustment), price reversals following mini-supply shock and a seasonal decline in certain perishables are major contributors to an overall decline in headline reading.
- The delay in monthly fuel adjustment (likely translating into lower realized electricity price in Feb’20) and declining LPG prices are expected to pull heavy-weight Housing and Utility Index lower by 2.5%MoM. Had NEPRA allowed the monthly fuel adjustment as per normal routine, the estimated inflation reading for Feb’20 would have been 40bps higher (~13%YoY).
- Near term inflation outlook remains uncertain, with a multitude of factors at play including the extent of seasonal decline in food prices, timing and scale of utility rate adjustments, and fiscal considerations.
- While inflation management in Feb’20 might earn the gov’t some respite, the monetary outlook remains unchanged, as the delay in monthly adjustment would only smoothen out the inflationary trajectory. Underlying price pressures are likely to persist in the near term, hence the central bank would remain on hold at least until 1HCY20.
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