Soaring energy, food costs keep weekly inflation on front burner

KARACHI: Weekly inflation increased 0.96 percent week-on-week and 45.64 percent year-on-year, the highest since September last year, as prices of essentials continued to surge.

Pakistan Bureau of Statistics (PBS) data issued on Friday attributed the surge in the sensitive price indicator (SPI) to the increase in prices of tomatoes (18.06 percent), tea (9.26 percent), lawn (5.77 percent), diesel (4.65 percent), potatoes (4.52 percent), bananas (4.00 percent), shirting (2.80 percent), sugar (2.70 percent), wheat flour (2.40 percent), petrol (1.84 percent), cooking oil 5 litre (1.20 percent), vegetable ghee 2.5kg (1.16 percent),

On the other hand, the PBS noted a decrease in the prices of onions (15.91 percent), chicken (5.97 percent), garlic (5.73 percent), pulse masoor (2.27 percent), eggs (2.26 percent), LPG (1.90 percent), vegetable ghee 1kg (1.39 percent), pulse gram (1.24 percent), pulse mash (1.08 percent), pulse moong (0.84 percent) and mustard oil (0.64 percent).

For the week under review, SPI was recorded at 246.22 points against 243.87 points registered last week and 169.06 points recorded during the week ended March 17, 2022.

Fahad Rauf, head of research at Ismail Iqbal Securities in his weekly note said that SPI increased mainly due to the rise in prices of printed lawn and cloth.

“The weekly SPI readings of the past few weeks show that the inflationary pressures are broad based and likely reflect second round of PKR devaluation and energy price adjustments by the government,” he said. “Overall, we expect inflationary pressures to continue due to persistent PKR devaluation.”

With Ramazan around the corner, Rauf noted that food prices would likely go up further. “We expect March-23 CPI (consumer price index) to come at 35-36 percent on YoY basis,” he added.

On YoY basis, SPI surged 45.64 percent, the highest since September 1, 2022, when flood-induced supply chain disruptions raised prices of perishables that made weekly inflation surge a record 45.5 percent on annualised basis.

The PBS data attributed the YoY rise in SPI to the jump in the prices of onions (233.89 percent), cigarettes (165.86 percent), gas charges for Q1 (108.38 percent), diesel (102.84 percent), tea (81.29 percent), petrol (81.17 percent), rice irri-6/9 (78.75 percent), broken basmati rice (78.10 percent), bananas (77.84 percent), eggs (72.19 percent), pulse moong (69.44 percent), wheat flour (56.27 percent) and bread (55.36 percent).

It also noted a decrease in the prices of tomatoes (21.87 percent) and chilli powder (7.42 percent).

Sticky inflation numbers along with the stalled International Monetary Fund (IMF) programme, pushed the State Bank of Pakistan (SBP) to raise its benchmark interest rate by 300 basis points to a 26-year high on March 2, 2023.

Arif Habib Limited in a report on Thursday said, “The monetary policy committee is set to commence its next meeting on April 4th and we expect the SBP to raise its policy rate by 100bps to 21 percent in this meeting.”

The expected outcome of the rate hikes includes the spread of massive poverty. The government has taken several decisions, including energy tariff hikes, to please the IMF for a meagre $1.1 billion bailout tranche.

For the groups spending up to Rs17,732; Rs17,733-22,888; Rs22,889-29,517; Rs29,518-44,175; and above Rs44,175; YoY SPI increased 41.32, 44.23, 44.51, 45.04, and 47.97 percent respectively.