February 2024 Pakistan Market Monitor Report: Tracking Pakistan’s Market
Published on: March 9, 2024.
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Headline Inflation Increases in January 2024
Headline inflation, based on the Consumer Price Index (CPI), saw an increase to 28.3% in January 2024, compared to 27.6% in the same month of the previous year. This rise in inflation has significant implications for the economy and the daily lives of individuals.
However, it’s worth noting that the annual food inflation rate, which is a subset of the CPI, decreased from 27.5% in December 2023 to 25.0% in January 2024. Despite this decline, the food inflation rate in Pakistan remains significantly high when compared to its neighboring countries.
One of the main factors contributing to high food inflation in Pakistan is the increase in energy and utility costs. The rising fuel prices also have a significant impact on the overall cost of production. Additionally, the depreciation of the Pakistani rupee has led to the increased prices of imported food items.
In terms of staple cereals, the prices of wheat and subsidized wheat flour increased by 1.1% and 0.5% respectively in January 2024, compared to December 2023. Looking back a year, there has been a substantial increase in prices for subsidized wheat flour (34.0%), fine wheat flour (10.3%), wheat (7.1%), rice Irri-6 (1.1%), and rice Basmati (0.8%).
Moving away from cereals, certain non-cereal food prices also saw an increase in January 2024. Live chicken, eggs, pulses such as gram, moong, mash, masoor, and sugar all experienced a slight rise in prices. When compared to the previous year, the prices of sugar, eggs, live chicken, and pulses increased significantly. However, the prices of cooking oil (-1.7%) and ghee (-0.3%) decreased in January compared to December.
The Terms of Trade (ToT), which measures the ratio of daily wage for unskilled labor to the price of wheat flour, worsened by 0.5% in January compared to December. On a year-on-year basis, the ToT worsened by 18.0% compared to January 2023. This decline indicates the challenges faced by unskilled labor, making it harder for them to maintain purchasing power.
In conclusion, the increase in headline inflation for January 2024 highlights the economic challenges faced by Pakistan. While the annual food inflation rate has decreased slightly, it still remains high compared to neighboring countries. Factors such as high energy and utility costs, fuel prices, production costs, and the devaluation of the currency all contribute to the high food prices. It is crucial for the government to address these issues to ensure the well-being of its citizens and the overall stability of the economy.
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