Pakistan’s headline inflation is expected to fall back into single digits in July after remaining above 10 percent for the past three months. However, analysts caution that the expected slowdown does not signal a broad easing in prices, as underlying inflationary pressures continue to persist.
Brokerage estimates suggest headline consumer price inflation (CPI) will come in slightly above 9 percent year on year, compared with 11.1 percent recorded in June.
Ismail Iqbal Securities expects inflation to ease to 9.3 percent in July. The brokerage believes the drop is mainly the result of favourable base effects rather than a meaningful slowdown in price growth.
While annual inflation is expected to decline, prices are still forecast to rise on a monthly basis. The brokerage estimates CPI will increase 1.3 percent from June, driven almost entirely by higher food prices.
Food inflation is projected to climb around 4 percent during the month, with sharp increases expected in tomatoes, potatoes, onions, fresh vegetables, chicken and eggs. Wheat and wheat flour prices are also likely to rise by nearly 5.7 percent over the month.
Some relief is expected from lower transport and housing costs. Transport inflation is forecast to fall 3.4 percent month on month after a 7.4 percent decline in motor fuel prices, while housing costs are expected to edge down 0.4 percent due to lower electricity and LPG charges.
Despite the softer headline number, Ismail Iqbal Securities expects non-food, non-energy core inflation to rise to 8.5 percent in July from 8.4 percent in June and 7.6 percent a year earlier. The brokerage said this suggests the improvement in headline inflation is being driven by volatile items such as fuel and perishable food, while broader price pressures remain largely unchanged.
JS Global Research also expects headline inflation to ease to 9.1 percent year on year in July.
The brokerage believes transport will remain one of the biggest contributors to annual inflation, with transport costs expected to jump 21 percent from a year earlier amid tensions in the Middle East and continued volatility in global energy markets.
Food inflation is also expected to remain elevated at 9.1 percent year on year. Housing inflation is projected at 8.4 percent, alongside monthly growth of 0.6 percent, while prices in the miscellaneous category are expected to increase 11.3 percent from the same period last year.
Although July’s reading is expected to bring headline inflation back below the 10 percent mark, analysts say persistent core inflation and rising food costs indicate that price pressures have yet to fully subside.
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