JS Securities Limited - JS Research.

Karachi -- February 02, 2023 (PPI-OT)

Jan-23 CPI shoots to 27.6% - more awaits in Feb-2023

CPI for Jan-2023 surpassed street estimates (~25.9%), clocking in at 27.6% YoY, qualifying for among the top 10 CPI readings in Pakistan's history with MoM increase coming in at 2.9%. On a cumulative basis, overall price levels measured by CPI are up 14.5% in the last seven months - an increase that usually takes ~1.5 years to transpire.

Jan's CPI readings do not incorporate the impact of recent devaluation or POL price hikes and have still come in higher than expectations. This sets the base higher for upcoming CPI readings which will reflect impact of ongoing and prospective macro adjustments, compared to previous base case. Feb CPI data point will be closely tracked by market given recent adjustments.

While our base case CPI estimate for Feb works out to be 32.9%, we share a sensitivity to changing energy and food prices to reflect the possible swing in headline CPI if price hikes in these critical components differ from our base case.

Jan-2023: Tall food inflation pulls headline inflation to 27.6%

CPI for Jan-2023 once again surpassed street estimates (~25.9%), clocking in at 27.6% YoY, qualifying for among the top 10 CPI readings in the country's history with MoM increase coming in at 2.9%, where food inflation was the key driver. For perspective, jump of a similar quantum is usually witnessed in a span of ~1.5 years. To note, pressure from the Rural segment has been aggravating, which is reflected across the board.

Key reason for the high inflation reading was higher food inflation. The segment, constituting 35% of the CPI basket, has already been reporting a higher pace of increase since some months, remaining above 30% since Sep-2022. In Jan-2023, food inflation clocked in at 42.9% YoY, marking a 5% MoM increase. This was led by increase in heavy-weight items such as Wheat (+15% MoM), Rice (+17% MoM), Chicken (+23% MoM) and fresh fruits and vegetables (+9% MoM).

Core inflation gets another push

Continuing ongoing trajectory, core inflation further...