Inflation likely to slip below 0.5pc in April: report

KARACHI: Headline inflation is expected to fall below 0.5 per cent in April, continuing a disinflationary trend that began earlier this year, according to a report by brokerage house Topline Securities.

The Consumer Price Index (CPI) may come in between 0.05 per cent and 0.5 per cent year-on-year (YoY) for April 2025, compared with 0.7 per cent in March and 1.5 per cent in February, the report said, citing a sharp decline in food and electricity prices. On a monthly basis, inflation is projected to contract 0.8 per cent.

“This will take average inflation for the first ten months of FY25 to 4.87 per cent, versus 26.22 per cent during the same period last year,” Topline said in the note published ahead of the Pakistan Bureau of Statistics’ official release.

Food inflation is expected to decline 3.32 per cent month-on-month (MoM) in April, led by a 25 per cent drop in fresh fruit prices, a 21 per cent decline in tomatoes and onions, and a 19 per cent fall in egg prices. In contrast, prices of milk, meat, spices and pulses are forecast to inch up by just 0.2 per cent on average.

The housing, water, electricity and gas category is also likely to post a minor 0.02 per cent decline, driven by a 6.8 per cent reduction in electricity tariffs and a 0.5 per cent fall in solid fuel (wood) prices. However, a 1.8 per cent rise in rents could offset some of the relief, the brokerage said, citing fuel cost adjustments and lower quarterly tariffs as key contributors to the drop.

Transport prices are projected to decline 0.12 per cent MoM, thanks to a 0.4 per cent reduction in fuel costs.Topline said its estimate is based on the average of Sensitive Price Indicator (SPI) readings for the weeks ending April 10 and April 17, the typical data cut-off period for monthly inflation estimates. Using only the April 17 SPI, CPI could even fall into negative territory, indicating deflation, within a range of -0.25 per cent to 0.25 per cent YoY.

Looking ahead, the brokerage lowered its full-year FY25 inflation forecast to 4.5-5.5 per cent, from an earlier range of 5-6 per cent, citing softening electricity, oil and food prices.Topline plans to release more comprehensive insights into the economy in its quarterly report at the end of April.