June witnesses a significant downturn in inflation, with the rate dropping to 29.40 percent compared to the previous month’s increase of 38 percent. This decline, as reported by the Pakistan Bureau of Statistics (PBS), can be attributed to the stabilization of the US dollar and a decrease in commodity prices. Notably, the food group, which holds a substantial weight in the inflation reading, played a significant role in driving down inflation.
The decrease in the food group’s inflation from 264.45 in May 2023 to 261.78 in June 2023 reflects a decrease of over 1 percent. Commenting on the decline, Fahad Rauf, Head of Research at Ismail Iqbal Securities, stated that they had projected CPI inflation to be around 29.9 percent and the decline was expected. He further explained that adjustments made last year in June to meet the requirements of the International Monetary Fund (IMF) resulted in a high base effect this month.
Factors contributing to the decrease in inflation include the stabilization of the US dollar and a decline in oil prices. Rauf expressed optimism that inflationary pressure is not currently building up and expects further declines in inflation after the IMF program. Anticipating the stabilization of the US dollar and softened international commodity prices, he believes these factors will contribute to a decrease in inflation.
Examining the rural and urban inflation rates, CPI inflation in urban areas recorded a year-on-year basis of 27.3 percent in June 2023, compared to an increase of 35.1 percent in the previous month and 19.8 percent in June 2022. On a month-on-month basis, urban inflation increased by 0.1 percent, compared to a 1.5 percent increase in the previous month and a 6.2 percent increase in 2022.
In contrast, CPI inflation in rural areas increased to 32.4 percent on a year-on-year basis in June 2023, compared to an increase of 42.2 percent in the previous month and 23.6 percent in June 2022. However, on a month-on-month basis, rural inflation decreased to 0.8 percent in June 2023, compared to a 1.7 percent increase in the previous month and a 6.6 percent increase in June 2022.
Read more: Pakistan’s Inflation Rate Experiences a 0.42% Weekly Decline
The decrease in rural inflation on a month-on-month basis can be seen as a positive development, indicating some level of stability. However, it is essential to continue monitoring the inflation situation in both rural and urban areas, as factors such as commodity prices and currency exchange rates can have a significant impact.
Overall, the significant downturn in inflation for the month of June is a positive development for Pakistan’s economy. The stabilization of the US dollar and the decrease in commodity prices have played a crucial role in driving down inflation. While inflationary pressures are not currently building up, it will be important to sustain this trend and ensure continued stability in the coming months.
