Weekly inflation hits 10-year low

ISLAMABAD: Weekly inflation in Pakistan has registered a significant decrease, reaching 1.8 per cent year-on-year for the week ending January 9, down from 3.97 per cent the previous week.

This marks the lowest inflation rate since October 2014, a noteworthy shift from the staggering 48.35 per cent peak recorded in May 2023, as reported by the Pakistan Bureau of Statistics (PBS).

The decline in inflation is largely attributed to a high base effect, according to independent economists. Thay say that while the numbers are improving, the average consumer continues to feel the pinch. The Sensitive Price Indicator (SPI), which tracks the cost of essential goods, showed a 0.65 per cent drop from the previous week, indicating a mixed trend in the prices of 51 monitored items across 17 cities. Of the items tracked, 18 saw price increases, while 10 experienced decreases, and 23 remained unchanged.

Notably, tomatoes plummeted by 31.4 per cent, and potatoes fell by 10.4 per cent. Other reductions included eggs down 6 per cent, gram pulse 1.64 per cent, onions by 0.87 per cent, rice basmati broken by 0.54 per cent, rice IRRI-6/9 by 0.40 per cent, and mash pulse by 0.27 per cent.

While cooking oil and sugar recorded modest increases of 1.56 per cent and 1.23 per cent, respectively. Prices for chicken, vegetable ghee, bread, washing soap, garlic, and firewood also increased but by less than 1 per cent compared to the previous week.

Economists predict that the declining SPI may lead to a sharp reduction in the Consumer Price Index (CPI) inflation for January 2025, with estimates ranging between 2.5 per cent to 3 per cent, down from 4.1 per cent in December 2024. This trend could prompt the State Bank to consider a cut of approximately 1.5 per cent in the discount rate by the end of this month. Currently, the policy rate is at 13 per cent.

SPI data also revealed disparities in how inflation impacts different income groups. Households earning less than Rs17,732 per month faced a 1.44 per cent increase in prices year-on-year, while those with monthly earnings exceeding Rs44,175 experienced a 2.22 per cent rise.

According to the SPI bulletin, among the items with the largest week-on-week decline, tomatoes saw a sharp fall of 31.4 per cent, while potatoes became 10.4 per cent cheaper. Other food items that experienced price reductions included eggs, which fell by 6 per cent,

A review of the SPI bulletin shows that inflation affected households differently. The lowest income group, earning less than Rs17,732 per month, faced a 1.44 per cent year-on-year increase in prices. In contrast, households earning more than Rs44,175 monthly saw a rise of 2.22 per cent.

Despite the overall decline, several essential items have seen substantial price hikes over the past year. Ladies’ sandals surged by 75 per cent, while potatoes and gram pulses rose by 59 per cent and 42 per cent, respectively. Similarly, moong pulse price increased by 34 per cent, powdered milk by 26 per cent, beef by 24 per cent, and garlic by 18 per cent. Gas charges for the lowest consumption slab increased by 15.5 per cent, vegetable ghee by 15.5 per cent, cooked daal by 15 per cent, shirting by 14.4 per cent, and firewood by 13 per cent over the past year.

Conversely, some items such as onions and wheat flour saw significant price reductions of 36 per cent each. Eggs and chili powder prices declined by 24 per cent and 20 per cent, respectively. Electricity charges for the lowest consumption slab decreased by 18.1 per cent.

Other items that became cheaper included masoor pulse by 11.2 per cent, rice basmati broken by 9.1 per cent, mash pulse by 7.0 per cent, diesel by 6.4 per cent, bread by 5.5 per cent, and petrol by 5.45 per cent.