KARACHI:
The Sensitive Price Indicator (SPI), a key indicator of short-term inflation, recorded a weekly decline of 0.39% for the week ended January 16, 2025. However, on an annual basis, the reading has increase. up 1.16%.
The decline in the inflation rate compared to the previous week was mainly due to lower prices of essential food items, including tomatoes, potatoes, onions and eggs.
The SPI reading for the week under review fell to 322.71 points from 323.97 the previous week. At the same time last year, the index stood at 319 points.
Significant week-on-week price declines were observed for essential 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%).
Conversely, the prices of several products increased, including bananas (3.22%), gasoline (1.39%), vegetable ghee (1.08%), cooking oil (1 .01%), firewood (1%), diesel (0.99%) and pulses. (0.89%). Other products whose prices have increased are sugar (0.72%), cooked daal (0.59%) and Basmati rice (0.58%).
Of the 51 items tracked by the SPI, 21 items (41.18%) experienced a price increase, 10 items (19.61%) experienced a decrease, and 20 items (39.21%) remained stable.
For the weekly SPI, price data are collected in 17 urban centers for all expenditure groups. For the lowest consumption group up to Rs17,732 per month, the SPI decreased by 0.62% to 314.75 points. Other consumer groups also saw declines.
For the group between Rs 17,732 and Rs 22,888, the SPI fell by 0.56%, for a consumption of Rs 22,889 to Rs 29,517, it fell by 0.46%, for a consumption ranging from Rs 29,518 to Rs 44,175, the SPI decreased by 0.43% and for the group above Rs44 175, the reading decreased 0.31%.
Over one year, the SPI recorded an overall increase of 1.16%. Significant price increases were noted for ladies sandals (75.09%), potatoes (47.91%) and pulses (39.77%). However, sharp declines were recorded in the prices of onions (47.22%), wheat flour (35.89%) and eggs (31.92%).
Shankar Talreja, head of research at Topline Securities, forecast Pakistan’s Consumer Price Index (CPI) for January to be between 2.5% and 3% year-on-year, the lowest in nine years. This will bring the average inflation for 7MFY25 to 6.66%, a significant decline from 28.73% in the same period last year.
With inflation expectations of 2.5-3% for January, real interest rates are expected to rise to 1,000-1,050 basis points (bps), well above Pakistan’s historical average of 200-300 pb.
Talreja forecast a reduction in the policy rate by 100 basis points to 12% at the State Bank’s monetary policy meeting on January 27 and the rate is expected to remain between 11% and 12% by the end of the year.
