ISLAMABAD: Pakistan’s inflation eased for a second consecutive month in December, with headline Consumer Price Index (CPI) inflation slowing to 5.6 percent, driven mainly by a sharp fall in perishable food prices, though rising housing costs and sticky core inflation underscored lingering pressure on the economy.
Inflation declined from 6.1 percent in November and 6.2 percent in October, but remained higher than the 4.1 percent recorded in December last year. On a month-on-month basis, consumer prices fell 0.4 percent in December, reversing a 0.4 percent increase in November.
Food inflation slowed significantly to 3.24 percent from 5.5 percent, led by a steep 20.1 percent year-on-year drop in perishable food prices. Prices of tomatoes plunged 52.6 percent, potatoes 42.8 percent, onions 28.9 percent and fresh vegetables 20.1 percent, offering notable relief to households. However, the benefit was partly offset by firmer non-perishable food prices, with inflation in that segment rising to 7.49 percent from 7.3 percent. Sugar prices surged 26.7 percent, wheat 25.3 percent, butter 24 percent, wheat flour 17.8 percent, chicken 12 percent and meat 10 percent.
Price pressures eased across several non-food categories. Inflation in clothing and footwear slowed to 6.22 percent from 6.5 percent, furnishing and household maintenance to 3.4 percent from 3.5 percent and health costs to 7.74 percent from 8.3 percent. Recreation and culture remained in deflation, with prices falling 4.28 percent, deeper than the 4.1 percent decline recorded in November.
In contrast, housing and utilities inflation accelerated to 6.86 percent from 5.3 percent, driven by higher energy and maintenance costs. Restaurant and hotel inflation also picked up, rising to 6.57 percent from 5.3 percent, adding to pressure on urban consumers.
Urban inflation eased marginally to 5.8 percent from 6.1 percent, while rural inflation fell more sharply to 5.4 percent from 6.3 percent, narrowing the urban-rural gap.
Core inflation, which excludes volatile food and energy prices, sent a mixed signal. Urban core inflation rose to 6.9 percent from 6.6 percent, though it was well below 8.1 percent recorded in December 2024. Rural core inflation edged down to 8.1 percent from 8.2 percent, compared with 10.7 percent a year earlier, indicating some easing in underlying price pressures. Core inflation had peaked at 20 percent in May 2023, when headline inflation hit a historic 38 percent and the State Bank of Pakistan’s policy rate stood at 22 percent. Now the policy rate stands at 10.5 percent. At the wholesale level, price pressures continued to ease, with the Wholesale Price Index slowing to 0.6 percent in December from 1.1 percent in November and 1.9 percent in the same month last year.
In the non-food segment, gas charges rose sharply by 22.9 percent, followed by education costs at 19.1 percent, newspapers 11.9 percent, postal services 10.5 percent, and medical tests 10.45 percent. Offsetting some of these increases, textbook prices fell 10.6 percent, while electricity charges declined 3.4 percent.
For the first half of FY26 (July-December), average inflation stood at 5.15 percent, sharply lower than 7.22 percent in the same period last year, pointing to a broader easing in price pressures even as energy costs and core inflation remain key risks.
