Prices: the devil is in the detail

The just-released Sensitive Price Indicator (SPI) for the week ending on November 22 shows an increase of above six per cent for the first time since January 2018. This is the combined SPI for all groups.

The finance minister wants us to look at the lowest income group. True, the burden of increase in essential prices is the lowest on the lowest income group. It was 2.15 per cent for the lowest income quintile of Rs8,000 per month and 10.49 per cent for the highest income quintile of above Rs35,000. What is, however, worrisome is that it has risen from less than one per cent to more than two per cent in a matter of Just 10 weeks. There is more.

Out of the 53 items, prices of 14 items increased over the previous week. The weight of these items in the SPI for the lowest income group is 37.62 per cent, which is higher than 31.25 per cent for the combined SPI. In simple words, the impact of price increases was greater on the lowest income quintile. Some items showed high increases for this group over the corresponding week in the previous year. There was a high jump of 37.71 per cent in the price of chicken farm, broiler, live. Tea, the commonest of the common items of use, showed an increase of 16.1 per cent, followed by an increase of 12.17 per cent for long cloth. Rice Basmati broken was costlier by 10.67 per cent. Cooking oil was expensive by 5.71 per cent. Wheat flour, bag, which has the highest weight in the SPI for the lowest quintile, was also on the list of items with increasing prices. It increased by 1.66 per cent. On the whole, the impact of the increased prices on the lowest income and all income groups combined was nearly the same, 0.2776 per cent points for the former and 0.2781 per cent points for the latter.



Prices of 10 items decreased over the previous week. Over the corresponding week last year, however, a number of these items showed high rises. For instance, the LPG cylinder of 11kg rose by 9.89 per cent and red chilli powder lost by as much as 34.85 per cent. Sugar, refined, with the highest weight of 3.799 per cent among these 10 items, increased by 2.6 per cent.

Average prices of the remaining 29 items remained unchanged over the previous week. Over the corresponding week of the previous year, however, prices of all items except two increased, many quite heavily. Energy was on top of the list. Kerosene rose by 36.54 per cent, High Speed Diesel (HSD) by 32.84 per cent, petrol super by 28.4 per cent and gas up to 3.3719 MMBTU by 12.73 per cent. Gas has a high weight of 3.2199 per cent in the consumption of the lowest quintile. Milk, fresh, unboiled is the heaviest weighted item here. Although the price increase is 3.65 per cent, the high weight of 17.0616 per cent translates into a relatively heavy impact. Beef with bone of average quality cost 11.5 per cent more and cooked beef at an average hotel even more at 16.16 per cent. Cigarettes, K-2, 20’s, something that the lower quintile is not yet willing to give up, rose by 16.47 per cent. Another common man addiction, telephone local call charges for three minutes went up by 18.02 per cent. Powdered milk, Nido, polybag increased by 5.05 per cent. Vegetable ghee, loose/pouch, (SN), with a high weight of 4.8228 per cent, increased by 5.65 per cent.

The devil, especially in the case of prices, is in the detail.

Published in The Express Tribune, November 30^th, 2018.

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