Wednesday November 29, 2023

FCA eases SPI inflation but flour prices jump

September 24, 2022

KARACHI: Weekly inflation dropped a massive 8.11 percent during the seven-day period ended September 22 despite drastic increase in prices of wheat flour, as government resorted to billing fuel charge adjustment (FCA) in a phased manner.

Pakistan Bureau of Statistics (PBS) data issued on Friday showed that sensitive price indicator (SPI) for the combined group declined 8.11 percent week-on-week and increased 29.28 percent year-on-year. During the previous week ended September 15, SPI declined 0.19 percent WoW and was up a whopping 40.58 percent YoY.

PBS attributed the WoW decline in SPI to the drop in prices of electricity for Q1 (64.23 percent), LPG (3.82 percent), tomatoes (8.15 percent), bananas (1.90 percent), garlic (1.31 percent), pulse masoor (0.99 percent), cooking oil 5 litre (0.78 percent), onions (0.46 percent), vegetable ghee 2.5kg (0.34 percent) and vegetable ghee 1kg (0.06 percent).

Fahad Rauf, head of research at Ismail Iqbal Securities, in his note said the decline was mainly due to electricity charges. “To recall, government had deferred Rs9.9/unit FCA for the month of June for consumers using up to 300 units. The same would now be collected in six instalments from October-March,” he said. On the other hand, Rauf noted that wheat flour prices have continued to increase, which he attributed to the impact of floods and higher wheat support prices announced for upcoming crops.

“We estimate September 2022 CPI (consumer price index) at 0.1 percent MoM (24.7 percent YoY), where higher food inflation would largely be offset by electricity FCA relief,” he added. The decision to spread FCA over six instalments brought inflation down numerically, with per unit rate of electricity declining to Rs3.47 compared to Rs9.7 last week and Rs6.38 last year. However, food inflation continues to wreak havoc on lower and middle income Pakistanis.

Wheat flour price has jumped up 22.47 percent WoW and 33.5 percent YoY to stand at Rs1,621.32/20kg. Wheat flour prices have been increasing continuously since the week-ended August 4, 2022.

The last decline was noted by PBS during the seven-day period ended July 28, when the average price of wheat flour declined to stand at Rs1,217.89/20kg bag. In the weeks since July 28, 20kg wheat flour price has jumped up by Rs403.43/20kg bag. During the same week in 2021, a wheat flour bag was available at an average Rs1,214.43 in the markets that were surveyed by the PBS.

PBS compiles SPI via collecting prices of 51 essential items from 50 markets in 17 cities of the country. During the week, out of 51 items, prices of 26 (50.98 percent) items increased, 10 (19.61 percent) items decreased and prices of 15 (29.41 percent) items remained unchanged. Of all the 51 items surveyed, only the prices of sugar, electricity and red chilli powder declined YoY. The rest of the commodities have registered a spike in prices compared to the same week last year.