Weekly inflation at a new 7-month low

Weekly inflation at a new 7-month low

The short-term inflation reading continued to decline by 1.10% in the week ending April 25, 2024 on the back of falling prices of food items including tomatoes, onions and chicken, maintaining its decline for the second week in a row.

According to the Pakistan Bureau of Statistics (PBS) and a local research firm, the Sensitive Price Indicator (SPI) – a weekly gauge of inflation – slowed to a new seven-month low of 26.94% in the latest week compared to the same week last year.

However, the inflation rate still remains high as shown in the double digit level.

The SPI is calculated weekly to assess price movements of key commodities at short intervals and their impact on consumers. The SPI consists of 51 important items whose data is collected from 50 markets in 17 cities in the country.

In the week under review, of the 51 commodities covered by the SPI, the prices of 15 (29.41%) items increased, 10 (19.61%) items decreased and 26 (50.98%) items remained unchanged compared to the previous week. The dampening of inflation was mainly due to the fall in tomato prices, which became cheaper by 20.83% to Rs92.56 per kg in the week ended April 25 compared to Rs116.92/kg last week.

It was followed by onion prices, which fell by 14.43% to Rs169.90/kg compared to Rs198.54/kg in the previous week. Chicken prices decreased by 11.64% to Rs456.24/kg compared to Rs516.32/kg a week earlier.

Prices of other essential commodities fell by up to 5%, including wheat flour, eggs, chili powder, bananas, liquefied petroleum gas (LPG) and garlic.

However, the prices of some other commodities increased by up to 1.80% on a week-to-week basis including potatoes, powdered milk, vegetable ghee, mashed pulses, sugar, gur, cooked pulses, mutton and clothes.

The year-over-year SPI trend reflects an increase of 26.94% with gas charges for Q1 increasing by 570% in the week under review compared to the same week last year. It was followed by tomatoes becoming more expensive by 122.34% and onions becoming more expensive by 121.31%.

Prices of other commodities jumped up to 76.53%, namely chili powder, men’s sandals, garlic, men’s sponge chappal, salt powder, clothes, gur, pounded pulse and beef.

Research house Optimus Capital Management expects that the benchmark monthly inflation, as measured by the Consumer Price Index, will contract by 3.6 percentage points to 17% in April 2024.

“Significant declines in the food index (down 2.6% month-on-month) and electricity prices (down 9.5% MoM), combined with favorable base effects, are expected to significantly reduce headline inflation by 3.6 percentage points… 17% year-on-year,” he said. .