Gas price surge drives weekly inflation to multi-year high

In a startling escalation, Pakistan’s weekly inflation, as measured by the Sensitive Price Indicator (SPI), has reached a multi-year high at 9.95% for the week ending November 16, 2023. This surge is primarily attributed to a significant increase in gas prices that took effect at the beginning of the month, according to data reported by the Pakistan Bureau of Statistics (PBS) on Friday.

In the preceding week ending November 8, the inflation reading was at 0.73%, highlighting the abrupt spike within a short span. The gas price increase alone contributed a staggering 480% to the weekly inflation reading, as reported by the PBS.

Speaking to The Express Tribune, Maaz Azam, an analyst from Optimus Capital Management, expressed surprise at the impact of the gas price hike, stating that it has surpassed market expectations. Azam’s analysis suggests that PBS included fixed costs, such as meter rent, in the weekly inflation calculation in addition to the gas tariff hike.

“The new working (of his research house) suggests the average monthly inflation reading for the current fiscal year 2023-24 has been projected to up by 1.6 percentage points to 25% compared to our previous forecast at 23.5%,” he said.

This weekly inflation rate of 9.95% is notably high, not witnessed in at least the past four and a half years based on available data, Azam stated.

Read: Weekly inflation sees uptick of 0.71%

Excluding the impact of the gas price hike, the overall inflation reading showed a decreasing trend. The State Bank of Pakistan (SBP) has expressed concerns about the rise in gas prices, anticipating potential impacts on future inflation. However, the SBP remains steadfast in its original projection of an inflation reading in the range of 20-22% for FY24, citing a likely drop in other commodity prices that would offset the anticipated impact. The central bank has projected that the monthly inflation reading, measured to CPI (consumer price index), will remain high in the ongoing first half (Jul-Dec) of FY24, but decelerate sharply in second half (Jan-Jun) FY24.

The PBS reported that the weekly inflation increase was influenced by rises in the prices of items such as Lipton tea, masoor pulse, chicken, garlic, powdered salt, wheat flour, prepared tea, LPG, potatoes, and shirting material.

Out of 51 items, the prices of 25 increased, 13 decreased, and 13 remained unchanged during the week. The year-on-year trend depicts a 41.90% increase in inflation reading compared to the same week last year. Gas charges for Q1 surged by a staggering 1,108.59% in the week compared to the same week last year. Additionally, other commodity prices, including cigarettes, wheat flour, chilies powdered, rice basmati broken, garlic, rice irri-6/9, gents sponge chappal, tea Lipton, gents sandal, gur, sugar and salt powder, witnessed increases ranging from 46.5% to 82% on a yearly basis.

Published in The Express Tribune, November 18^th, 2023.

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