SPI index surges to three-week high at 26.41%: Food and energy prices drive inflation

The Sensitive Price Indicator (SPI) index recorded a notable surge, reaching 26.41 per cent for the week ending on September 7, 2023, marking a three-week high. This increase was primarily propelled by the persistent rise in food and energy prices when compared to the same week in the previous year, putting added strain on households’ purchasing power and disposable income.

Within this week, data from the Pakistan Bureau of Statistics (PBS) revealed that out of 51 items, 32 (62.75 per cent) experienced price increases, 5 (9.80 per cent) saw decreases, while 14 (27.45 per cent) remained unchanged, in contrast to the previous week.

Food items saw significant price hikes, including a 17 per cent increase in tomato prices, a 10.87 per cent uptick in pulse masoor prices, a 6.73 per cent rise in sugar prices, a 4.66 per cent surge in garlic prices, and a 3.62 per cent uptick in gur prices. Pulse moong prices rose by 3.55 per cent, onions by 3.43 per cent, and pulse gram by 3.25 per cent. Among non-food items, diesel prices soared by 6.28 per cent, LPG (liquefied petroleum gas) increased by 5.19 per cent, and petrol prices rose by 5.12 per cent.

Conversely, there was a decline in the prices of certain items, including chicken by 3.20 per cent, 5-liter cooking oil by 1.03 per cent, 2.5 kg vegetable ghee by 0.47 per cent, Lipton tea by 0.43 per cent, and 1 kg vegetable ghee by 0.14 per cent, compared to the previous week.

Looking at the bigger picture, the Consumer Price Index (CPI) revealed that monthly inflation has remained persistently high, averaging 27.8 per cent in the first two months (Jul-Aug) of the current fiscal year 2023-24. This was primarily attributed to recent rupee depreciation, imported inflation, and the continuous ascent of power and petroleum product prices.

It is anticipated that September’s monthly inflation reading will reach its peak, with experts also suggesting the possibility of the government raising gas prices, further exacerbating inflationary pressures on the economy.

To combat inflation, the Pakistan central bank is expected to raise its key policy rate by 1.5 to 2 percentage points during its upcoming Monetary Policy Committee (MPC) meeting on September 14. The current policy rate stands at a record high of 22 per cent.

Topline Research highlighted significant developments since the last MPC meeting on July 31, 2023, including Pakistan posting a current account deficit of $809 million in July after four consecutive months of current account surplus. 

Additionally, local fuel prices have increased by around 19 per cent, international oil prices in US dollars have risen by 6 per cent, and the rupee has depreciated by 6 per cent against the US dollar. These factors are expected to weigh heavily on the central bank committee’s decision during the upcoming MPC meeting.