KARACHI:
The Sensitive Price Indicator (SPI), a key indicator of short-term inflation, recorded a weekly decline of 0.39% during the week ending January 16, 2025; However, in year-on-year terms, the reading was up 1.16%.
The drop in the inflation rate compared to the previous week was mainly due to the decrease in prices of essential food products, including tomatoes, potatoes, onions and eggs.
The SPI reading for the week analyzed fell to 322.71 points compared to 323.97 the previous week. Last year, around the same time, the index stood at 319 points.
Significant weekly price reductions were observed for basic commodities, including tomatoes (18.31%), potatoes (10.42%), onions (10.01%), eggs (8.64%), chicken (2.17%), liquefied petroleum gas (1.21%). %), legume puree (0.81%), mustard oil (0.67%) and garlic (0.54%).
On the contrary, prices of several items increased, including bananas (3.22%), gasoline (1.39%), vegetable ghee (1.08%), cooking oil (1.01% ), firewood (1%), diesel (0.99%) and legumes. (0.89%). Other commodities that saw price increases 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%) experienced a drop, and 20 items (39.21%) remained stable.
For the weekly SPI, price data is collected from 17 urban centers for all spending groups. For the lowest consumption group, up to Rs 17,732 per month, the SPI decreased by 0.62% to 314.75 points. Other consumption groups also showed a decrease.
For the group in the range of Rs 17,732 to Rs 22,888, the SPI fell by 0.56%, for consumption ranging from Rs 22,889 to Rs 29,517, it fell by 0.46%, for consumption ranging between Rs 29,518 and Rs 44,175, the SPI fell by 0.43% and for the group above Rs 44,175, the reading decreased 0.31%.
Year over year, the SPI reflected an overall increase of 1.16%. Significant price increases were observed in women’s sandals (75.09%), potatoes (47.91%) and legumes (39.77%). However, sharp falls were recorded in the prices of onion (47.22%), wheat flour (35.89%) and eggs (31.92%).
Topline Securities Research Director 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 take the average inflation for the seventh period of FY25 to 6.66%, a significant drop compared to 28.73% in the same period last year.
With inflation expectations of 2.5-3% for January, real interest rates are expected to soar to 1,000-1,050 basis points (bps), far exceeding Pakistan’s historical average of 200-300 bps.
Talreja forecast a policy rate cut of 100 basis points to 12% at the State Bank’s monetary policy meeting on January 27 and the rate was expected to remain between 11% and 12% at the end of the year .
