Inflation rises for third week

The weekly inflation reading, measured through the Sensitive Price Indicator (SPI), rose 0.76% in the week ended July 18, 2024, propelled by the hike in food and energy prices and maintaining its uptrend for the third consecutive week.

The trend suggests the central bank may hold its key policy rate unchanged at 20.5% in the monetary policy meeting to be held later this month, contrary to earlier expectations of a second consecutive reduction in the cost of borrowing.

According to the Pakistan Bureau of Statistics (PBS), the short-term inflation rate surged 24.36% when compared with the same week of last year.

The week-on-week rise of 0.76% was led by the increase in chicken (live farm broiler) price by 10.26% to Rs411.54 per kg compared to Rs373.25/kg in the previous week.

It was followed by milk powder (a 390-gram polybag of Nido), which rose 4.56% to Rs1,029.27/pouch against Rs984.38/pouch last week.

Petrol got expensive by 3.77% to Rs276.78/litre compared to Rs266.72/litre a week earlier. Eggs cost 2.76% more at Rs252.80/dozen compared to Rs246.02/dozen last week.

For potatoes, consumers paid 2.30% more at Rs99.23/kg compared to Rs97/kg in the previous week.

Prices of other essential commodities increased up to 2.25% in the week under review, which included high-speed diesel, garlic, sugar, pulses, tea and rice.

SPI comprises 51 essential items whose data is gathered from 50 markets across 17 cities in the country.

During the week ended July 18, 2024, prices of 29 (56.87%) items increased, rates of five (9.80%) items decreased and prices of 17 (33.33%) items stood unchanged compared to the previous week.

The year-on-year increase of 24.36% in the SPI was driven by gas charges for Q1, which surged 570% compared to the same week of last year. It was followed by onions, which became costlier by 105.46%.

Prices of other essential commodities rose up to 58%, which included tomatoes, milk powder, gram pulse, garlic, chilli powder, moong pulse, gents’ sandal, shirting, salt powder, LPG, mash pulse, beef and electricity charges for Q1.

Commodity prices have soared apparently in the face of a tax-heavy budget for fiscal year 2024-25. In addition, exorbitant power, gas and petroleum product prices are also fueling the short-term inflation.

The pace of Consumer Price Index (CPI) accelerated to 12.6% in June 2024 compared to a two-and-a-half-year low of 11.8% in May 2024.