Weekly Inflation Sees Minor Increase Amid Cost-of-Living Pressure

December 14, 2024 Mahi Bukhari

Introduction to Weekly Inflation

In Pakistan, inflation is a significant concern for many households, particularly in urban areas where the cost of living has been rising steadily. The Sensitive Price Indicator (SPI) is a vital measure used to track inflation, specifically focusing on the prices of 51 essential commodities, including food and non-food items. For the week ending December 12, 2024, the SPI saw a slight increase of 0.07%, marking a small uptick compared to the previous two weeks of decline.

This marginal rise in inflation, though minimal, highlights the ongoing challenges that households face as the cost of living continues to fluctuate, especially with the upcoming winter season.

SPI: A Snapshot of Price Changes

The SPI data provides a breakdown of price fluctuations across different categories. Notably, several food items saw price increases, while others experienced slight reductions. This contrast paints a picture of the current economic environment, where some items become more expensive, while others offer slight relief for consumers.

For the week ending December 12, the key increases were seen in food items like chicken, vegetable ghee, and bananas, while onions, tomatoes, and eggs saw significant price reductions.

Detailed Analysis of Price Fluctuations

Key Price Increases

Chicken: Chicken prices experienced the highest rise of 3.80%, with a price increase to Rs334.38 per kilogram. This surge reflects a seasonal increase in poultry prices, which often spikes in colder months due to increased demand.

Vegetable Ghee (2.5 kg): The price of vegetable ghee saw a notable increase of 2.27%, reaching Rs1,438.20. This rise is attributed to both local market trends and global fluctuations in oil prices.

Bananas: Banana prices climbed by 1.99%, with a price of Rs120.55 per dozen. As a staple fruit, bananas often see price changes due to seasonal factors and supply-demand dynamics.

Potatoes: Potatoes, another essential item, saw a rise of 1.93%, with a price of Rs120.45 per kilogram. The price increase is due to various factors, including crop yields and transportation costs.

Other food items, such as mustard oil (up 1.07%) and cooking oil (5 litres, up 0.98%), also saw price hikes. In the non-food sector, essential household items like washing soap (up 0.80%) and energy saver bulbs (up 0.31%) recorded minor increases.

Key Price Reductions

In contrast to the food items that saw price hikes, several essentials saw price reductions.

Onions: The price of onions dropped by 3.58%, reaching Rs146.66 per kilogram. Onions, a critical ingredient in Pakistani households, often see seasonal fluctuations due to harvests and weather conditions.

Tomatoes: Similarly, tomato prices fell by 3.10%, with a cost of Rs134.94 per kilogram. Like onions, tomatoes are highly sensitive to supply and demand, and the recent drop could indicate improved supply from local farms.

Eggs: Egg prices decreased by 2.14%, reaching Rs347.69 per dozen. This decline in the price of eggs is a welcome relief for households, particularly those that rely on eggs as an affordable source of protein.

Other food items, including garlic (-1.58%) and pulse gram (-1.19%), also experienced price reductions. Non-food items like firewood showed a slight decrease of 0.16%.

Insights from Experts

Experts like Sana Tawfiq, Head of Research at AHL, noted that the price trends for the week were relatively stable, with minor fluctuations across the monitored items. The overall decrease in the SPI food basket by 0.2% suggests that supply chain improvements have helped keep some essential goods more affordable. However, as winter sets in, food prices, particularly eggs and poultry, are expected to rise again.

Maaz Azam, Research Head at Optimus Capital, explained that the minimal inflationary increase can be attributed to base effects from last year’s price hikes. Energy and food prices saw reductions partly due to the absence of a major gas price increase, which had a significant impact on inflation in November of the previous year.

Year-on-Year (YoY) Inflation Overview

Annual Price Trends

When analyzing the year-on-year (YoY) trends, the inflation data shows an increase of 3.71%. This indicates a relatively consistent inflationary pressure across the country, affecting both food and non-food items.

Key YoY Price Increases

Certain essential goods have seen significant price hikes over the year, including:

Ladies’ Sandals (75.09%): A massive year-on-year increase was seen in the price of ladies’ sandals. This spike reflects not just inflation but also shifts in consumer preferences and import costs.

Pulse Gram (59.55%): The price of pulse gram surged by nearly 60%, underscoring the inflationary pressure on essential food items, especially those relied upon by lower-income households.

Potatoes (36.16%): Potatoes, which are a staple in every Pakistani household, saw a notable 36.16% increase, making it more difficult for families to maintain their usual consumption levels.

Key YoY Price Reductions

However, the year-on-year comparison also highlights some positive developments in the price of essential items:

Wheat Flour (-35.88%): Wheat flour saw a substantial reduction, with a drop of almost 36%. This reduction is a welcome change, as flour is a staple in many households.

Chili Powder (-20.00%): The price of chili powder also saw a considerable drop of 20%, which could help alleviate the financial burden for households that depend on spices.

Diesel (-10.77%): Diesel prices saw a significant reduction of nearly 11%, which helps lower the transportation costs for goods and services across the country.

Conclusion: The Path Ahead for Inflation in Pakistan

The latest SPI data reflects a relatively stable week in terms of inflation, with minimal week-on-week changes in prices. However, the year-on-year data paints a different picture, highlighting continued inflationary pressure on certain essential goods. As we approach the colder months, it is expected that some food prices, especially eggs and poultry, may increase due to seasonal demand.

In Summary:

Weekly inflation remained stable with minor price fluctuations.
Key food items like chicken and bananas saw price increases.
Some essential items, such as onions and tomatoes, saw price reductions.
Year-on-year inflation stands at 3.71%, with significant hikes in the price of food and non-food essentials.
Consumers are likely to face continued cost-of-living pressures in the coming months.

Frequently Asked Questions (FAQs)

1. Why did chicken prices increase by 3.80% this week?

Chicken prices rose due to increased demand, especially with the onset of winter. Seasonal fluctuations in supply can also contribute to higher prices.

2. Which food items saw the most significant price reductions this week?

Onions, tomatoes, and eggs experienced the most notable price drops, with onions falling by 3.58%, tomatoes by 3.10%, and eggs by 2.14%.

3. How does the year-on-year inflation data compare to weekly inflation?

Year-on-year inflation stands at 3.71%, showing a consistent increase in the prices of essential items compared to the same period last year. In contrast, weekly inflation showed a slight increase of 0.07%.

4. Will food prices continue to rise in the coming weeks?

Yes, it is expected that food prices, particularly eggs and poultry products, may increase further due to higher seasonal demand during the winter months.

5. What is the role of the Sensitive Price Indicator (SPI)?

The SPI tracks the price changes of 51 essential commodities, both food and non-food items, providing a snapshot of inflationary trends on a weekly basis.