Short-term inflation drops 0.26%

Tomatoes, potatoes lead fall in SPI reading; chicken, onions see price surge

Listen to article

KARACHI:

The Sensitive Price Indicator (SPI), a key measure of weekly price changes in essential commodities, recorded a 0.26% decrease for the week ended January 2, 2025, breaking a three-week streak of consecutive increases.

The decline was primarily driven by significant reductions in prices of tomatoes, electricity charges for the first quarter, and rates of potatoes. Smaller decreases were observed in items such as pulse gram, eggs, garlic, liquefied petroleum gas (LPG), wheat flour, and pulse mash, the Pakistan Bureau of Statistics (PBS) reported on Friday.

The weekly inflation was in line with expectation, said Optimus Capital Management Research Head Maaz Azam. "It remained soft."

On a week-on-week (WoW) basis, the decrease was observed in tomatoes at 13.48% to Rs220.86/kg, electricity charges for the first quarter at 7.48% to Rs6.06/unit, potatoes 5.59% to Rs106.76/kg, pulse gram 0.34% to Rs372.52/kg, eggs 0.23% to Rs336.46/dozen, garlic 0.21% to Rs687.19/kg, LPG 0.18%, wheat flour 0.09%, and pulse mash 0.05%.

Conversely, significant increases were seen in prices of chicken at 10.28% to Rs451.29/kg, onions 4.93% to Rs451.29/kg, bananas 1.68% to Rs121.05/dozen, diesel 1.18% to Rs259.56/litre, pulse moong 1.08% to Rs392.05/kg, sugar 0.95% to Rs138.64/kg, gur 0.58%, firewood 0.55%, vegetable ghee (2.5 kg) 0.53%, vegetable ghee (1 kg) 0.28%, and petrol 0.21%.

During the week, of the 51 items monitored, prices of 18 items (35.29%) increased, 10 items (19.61%) decreased, and 23 items (45.10%) remained stable.

The year-on-year trend revealed an increase of 3.97%, with notable price hikes in tomatoes (77.84%), ladies' sandals (75.09%), potatoes (66.63%), pulse gram (47.53%), pulse moong (30.73%), powdered milk (25.62%), beef (23.94%), garlic (17.82%), gas charges for the first quarter (15.52%), cooked daal (15.10%), shirting (14.36%), and firewood (13.18%).

However, significant decreases were observed in wheat flour (36.12%), onions (29.95%), chilli powder (20%), eggs (15.78%), electricity charges for the first quarter (13.92%), pulse masoor (11.24%), rice Basmati broken (8.42%), diesel (6.39%), bread (6.01%), pulse mash (5.98%), and petrol (5.45%).

In the recent past, the SPI recorded a 0.22% decline in the week ended on October 17, 2024, followed by alternating increases and decreases. The largest weekly increase was registered on December 14, 2024, with a WoW rise of 0.80%, which marked a notable surge in the SPI reading.

Conversely, the sharpest decline was recorded on December 21, 2024, with a WoW decrease of 0.34%. By January 2, 2025, the WoW change reflected a 0.26% decline, indicating stabilisation in the SPI.

Monthly inflation, measured by the Consumer Price Index (CPI) which covers prices of around 600 goods, further slowed to 4.1% in December, creating more space for a policy rate cut this month without jeopardising fiscal and external sector stability.

This slower pace aligns with the federal government's expectations but is lower than the central bank's estimate, which had anticipated a slight rise. The central bank had projected a gradual increase in inflation starting in December due to the fading base effect.

The Ministry of Finance indicated last week that inflation could remain within the 4-5% range. The State Bank is set to hold its next monetary policy meeting before the end of this month to decide on the policy rate.