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CPI Hits Record Low in December 2024
Pakistan’s Consumer Price Index (CPI) dropped to an 80-month low of 4.1% YoY in December 2024, the lowest since April 2018 (3.96%). This marks a sharp decline from 29.7% in December 2023 and 4.9% in November 2024, signaling a major easing of inflationary pressures.
For the first half of FY25, average inflation stood at 7.22%, significantly lower than 28.8% in the same period last year. On a calendar-year basis, average inflation fell to 13.13% in 2024, compared to 30.92% in 2023.
Key Drivers of December Inflation
Year-on-Year Changes:
- Primary contributors to the 4.1% YoY CPI increase:
- Housing: +3.4%
- Restaurants and Hotels: +7.9%
- Household Equipment: +5.2%
- Clothing and Footwear: +14.4%
- Health: +13.3%
- Education: +10.3%
- Miscellaneous categories such as Recreation and Culture (+8.0%) and Communication (+12.2%).
- Transport prices fell by 2.5%, while Food prices increased marginally by 0.3%.
Month-on-Month Changes:
- Inflation rose by 0.1% MoM.
- Food prices remained flat due to declining costs of chicken, pulses, onions, and vegetables.
- Transport costs increased by 1.1% MoM due to higher domestic fuel prices.
- The Housing Index dropped 0.8% MoM, driven by:
- A 5.7% MoM drop in electricity prices.
- The reduction in Fuel Cost Adjustment (FCA) to PKR 1.14/KWh and the Quarterly Tariff Adjustment (QTA) to PKR 0.2/KWh.
Core Inflation Trends
Core inflation eased to 9.1% YoY in December 2024, down from 9.8% in November 2024:
- Urban Core Inflation: 8.1% YoY (down from 8.9% in November).
- Rural Core Inflation: 10.7% YoY (down from 10.9% in November and 25.1% in December 2023).
On a month-on-month basis:
- Urban areas saw a 0.2% MoM increase in core inflation.
- Rural areas recorded a 0.6% MoM increase in core inflation.
Future Implications
The sharp decline in inflation offers relief for households and businesses, improving purchasing power and fostering a stable economic environment. However, rising transport costs and MoM core inflation increases warrant monitoring, as they may signal underlying pressures.
With a steep drop in average inflation for the first half of FY25, Pakistan’s economic outlook remains cautiously optimistic, supported by government efforts to stabilize energy tariffs and curb food price volatility.
The December 2024 inflation data underscores Pakistan’s success in taming inflationary pressures, marking a significant milestone in the country’s economic recovery.
