In December, inflation reaches 29.6 percent in Pakistan

In December 2023, Pakistan witnessed a notable rise in inflation, reaching 29.66%, a slight increase from the previous month's 29.2%. Despite this, the core inflation, excluding food and energy costs, marked a ten-month low at 18.2%. This dip in core inflation may lead policymakers at the State Bank of Pakistan (SBP) to contemplate reducing the discount rate in the coming month to stimulate economic activities and foster growth.

The spike in headline inflation, as measured by the Consumer Price Index (CPI), is attributed to elevated food and energy costs, surpassing the government's initial forecast of 25.5 to 26.5% made in early December. In November, inflation experienced a modest 0.8% uptick, a notable decrease compared to the 2.7% increase in the previous month and 0.5% in December 2022.

Housing and utility costs played a pivotal role in the inflation surge, rising by 37.68% from November's 32.97%. This category, accounting for nearly one-fourth of the CPI basket, became 3.56% costlier on a month-to-month basis.

For the first half of the fiscal year (July-Dec 2023-24), average inflation stood at 28.8%, surpassing the government's target of 21% and the State Bank of Pakistan's range of 20 to 22%.

Food inflation in December YoY was 27.5%, slightly lower than the previous month's 27.95%, with a month-to-month decrease of 0.49%. Alcoholic beverages and tobacco maintained an inflation rate of 82.8%, increasing by 0.5% over November. Recreation and culture costs decreased to 38.48%, lower than the 53.56% recorded in November.

Transport expenses increased to 28.6%, and hotel and restaurant charges in December were 30.7% higher than a year ago. Core inflation, a significant factor in policy rate decisions, increased every month but declined on a YoY basis, reaching 18.2% in December.

The wholesale price index (WPI) rose to 27.3% in December, while the sensitive price indicator (SPI) recorded at 35.3% against 30.6% in November.