Abdul Ghani

Pakistan recorded one of its lowest inflation rates in recent years in August 2025, with consumer price growth easing to just 3.0 percent year-on-year.

However, the latest Monthly Economic Update & Outlook – September 2025 cautions that essential services such as education and health continue to register steep price increases, creating pressure on household budgets.

The Finance Division reported that CPI inflation averaged 3.5 percent in July–August FY2026, a dramatic fall from 10.4 percent in the corresponding period of last year. In August 2025 alone, inflation declined to 3.0 percent from 4.1 percent in July, compared to 9.6 percent in August 2024. Month-on-month, the CPI even fell by 0.6 percent, reversing a 2.9 percent increase in July.

The disaggregated data shows that the sharpest declines were observed in perishable food prices, which dropped 21.6 percent year-on-year, providing relief to consumers. Recreation and culture costs also dipped by 2.3 percent. In contrast, education costs rose by 10.9 percent, health by 10.6 percent, clothing and footwear by 8.1 percent, and restaurants and hotels by 7.2 percent. Housing, water, electricity, gas and fuels increased by 3.6 percent, while transport registered a 2.5 percent rise.

The Sensitive Price Indicator (SPI) for the week ending September 25, 2025, declined by 0.16 percent. Out of 51 essential items monitored, prices of 17 rose, 11 fell, and 23 remained unchanged. The Finance Division emphasized that while the moderation in inflation is a positive sign for macroeconomic stability, pressures on education and health costs are concerning, especially for middle- and lower-income households.

Economists warn that if these essential services continue to record double-digit inflation, the benefits of overall disinflation may not be fully felt by ordinary citizens. The report concludes that although temporary price spikes are possible due to flood-induced supply chain disruptions, inflation is expected to remain contained within the 3.5–4.5 percent range in September 2025.

Credit: INP-WealthPk