The CPI clocked at 23.2 percent in Sept 22 and 25.1 percent in the 1QFY23 – highest quarterly inflation ever recorded. On monthly basis, the headline inflation is down from 27.2 percent in Aug 22. The relatively lower inflation in Sept 22 is due to monthly decline of 1.15 percent. This fall is despite food prices being up 5.4 percent in just a month.

The reason being is a monthly decline of 1.15 percent in housing and utility index – further narrowing down to 65.3 percent monthly fall in electricity charges. And on a yearly basis, electricity charges are down by 30.5 percent in Sept 22. Yes, you are reading it right. It’s a massive fall in electricity prices which is in stark contrast to what you see in your bills.

What the PBS did is to reduce the FPA to zero for consumers falling under 300 units on single phase meters for September, and they built in refunds for Rs9.89/Kwh what was billed and paid in August. Since the PM announced to not recover FPA from these consumers and they are billed in September with refunds against the payments made in August. Hence, the decline.

The calculations done in the decline are not adding up fully by applying the weights and using the tariff written in SPIs for the bottom quantile. It seems PBS has deducted higher amount than it should have for refunds on August FPA. However, PBS team is convinced that they have done it right.

Barring that, there is no respite on the inflation. it is hitting the rural community harder. It stood at 26.1 percent and on monthly basis increased by 0.2 percent – event 2/3rd reduction in electricity charges are not enough to take their monthly change in red. The urban inflation stood at 21.2 percent and is down by 2.1 percent in the last month. The core inflation kept on growing – it stood at 14.4 percent for urban and rural number came at 17.6 percent. The SPI averaged at 30.2 percent for the last quarter while the WPI stood at 39.6 percent.

Food prices are up by 5.8 percent in a month and the yearly increase is at 21.7 percent in September 22. Perishable food items are up 50.3 percent. Floods have a role to play in this chaos too. The highest increase on monthly basis is in tomatoes and vegetables. On yearly basis, tomatoes, pulses, and cooking oils are on the top.

For all other sectors, apart from communication, inflation is in double digits. The lesser evils are health and education where the increase is 12.3 percent and 10 percent. This is showing that services inflation is low and perhaps wages are not increased as sharply the commodities and goods prices.

Transportation is on the top of the list at 62.3 percent. This is due to sharp increase in the fuel prices in the past few months. Now the international prices are moving down while the government has frozen the petroleum levy – without the consent on the IMF. If the PL does not increase, fuel prices could come down further, and that may help easing the inflation.

The SBP expects the full year inflation at 18-20 percent and its likely to remain around these levels. With demand destruction and tapering of commodity prices, SBP may take a pause in the upcoming monetary policy.


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