KARACHI:
The Sensitive Price Indicator (SPI), a key short-term inflation gauge, registered a week-on-week decline of 0.39% for the week ended January 16, 2025, however, on a year-on-year basis, the reading went up 1.16%.
The drop in inflation rate compared to the previous week was primarily led by decrease in prices of essential food commodities, including tomatoes, potatoes, onions and eggs.
SPI reading for the week under review receded to 322.71 points compared to 323.97 in the previous week. At the same time last year, the index stood at 319 points.
Significant week-on-week price reductions were observed for essential commodities, including tomatoes (18.31%), potatoes (10.42%), onions (10.01%), eggs (8.64%), chicken (2.17%), liquefied petroleum gas (1.21%), pulse mash (0.81%), mustard oil (0.67%) and garlic (0.54%).
Conversely, prices of several items increased, which comprised bananas (3.22%), petrol (1.39%), vegetable ghee (1.08%), cooking oil (1.01%), firewood (1%), diesel (0.99%) and pulse moong (0.89%). Other commodities experiencing price hike were sugar (0.72%), cooked daal (0.59%) and Basmati rice (0.58%).
Of the 51 items monitored by the SPI, 21 items (41.18%) recorded a price increase, 10 items (19.61%) saw a decline and 20 items (39.21%) remained stable.
For the weekly SPI, price data is gathered from 17 urban centres for all expenditure groups. For the lowest consumption group up to Rs17,732 per month, the SPI decreased 0.62% to 314.75 points. Other consumption groups also showed a decline.
For the group in the range of Rs17,732 to Rs22,888, the SPI fell 0.56%, for consumption of Rs22,889 to Rs29,517, it dropped 0.46%, for consumption ranging from Rs29,518 to Rs44,175, the SPI eased 0.43% and for the group above Rs44,175, the reading decreased 0.31%.
Year-on-year, the SPI reflected an overall increase of 1.16%. Significant price hikes were noted for ladies’ sandals (75.09%), potatoes (47.91%) and pulse gram (39.77%). However, steep declines were recorded in prices of onions (47.22%), wheat flour (35.89%) and eggs (31.92%).
Topline Securities Director Research Shankar Talreja projected that Pakistan’s Consumer Price Index (CPI) for January would be between 2.5% and 3% year-on-year, the lowest in nine years. This will bring average inflation for 7MFY25 to 6.66%, a significant drop compared to 28.73% in the same period of last year.
With inflation expectations of 2.5-3% for January, real interest rates are expected to soar to 1,0001,050 basis points (bps), far exceeding Pakistan’s historical average of 200-300 bps.
Talreja forecast a 100bps policy rate cut to 12% in the State Bank’s monetary policy meeting on January 27 and the rate was expected to remain between 11% and 12% by year-end.