SPI December 5,2024 price drop inflation

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Introduction: SPI Decline and Impact on Inflation

The Sensitive Price Indicator (SPI), which tracks the prices of essential goods for consumers, has recorded a decline for the second consecutive week, marking a positive shift in the country’s inflationary trend. For the week ending December 5, 2024, the SPI decreased by 0.34%, reflecting a significant drop in food prices. This reduction comes amidst efforts to control inflation in Pakistan, which has shown signs of cooling, particularly in the food sector. The decline is being attributed to lower prices for items like tomatoes, chicken, and pulses, among others.

H2: Factors Contributing to the Decline in SPI

The key drivers behind the recent SPI drop are substantial price reductions in essential food items. Tomatoes, for instance, have seen a significant price drop of 25.15%, now priced at Rs139.26 per kilogram, compared to previous weeks. Similarly, chicken prices have fallen by 9.90%, with the cost now at Rs322.14 per kilogram. These declines have positively impacted the overall SPI, helping to ease inflationary pressures for consumers.

H3: Food Price Reductions and Market Trends

Several food items have experienced substantial price drops, reflecting broader trends in the market. Below are some of the major food price reductions observed in the SPI for the week:

• Tomatoes: -25.15%, now Rs139.26/kg
• Chicken: -9.90%, now Rs322.14/kg
• Pulse Mash: -1.67%, now Rs511.08/kg
• Pulse Gram: -0.73%, now Rs385.04/kg
• Wheat Flour: -0.71%, now Rs1,821.84/20kg
• Pulse Masoor: -0.46%, now Rs300.20/kg
• Rice Varieties (Basmati Broken and IRRI-6/9): -0.37%, now Rs204.40/kg and Rs161.05/kg, respectively
• LPG (Liquid Petroleum Gas): -0.19%, now Rs3,437.52 per 11.67kg cylinder

These reductions indicate that while the food sector is cooling, some prices still remain volatile, creating mixed trends in the SPI.

H2: Price Increases Across Other Sectors

While many food items saw a reduction, some essential goods have experienced price increases. This price volatility is characteristic of markets, where fluctuations depend on supply, demand, and external factors. The following items experienced notable price hikes during the same period:

• Garlic: +1.83%
• Vegetable Ghee (2.5 kg): +1.72%
• Potatoes: +1.69%
• Petrol: +1.48%
• Sugar: +1.33%
• Diesel: +1.27%
• Onions: +1.10%
• Vegetable Ghee (1 kg): +1.07%
• Cooking Oil (5 Litres): +0.99%
• Bananas, Firewood, Cigarettes: +0.48%, +0.14%, +0.09% respectively

These increases, while relatively modest, point to ongoing pressures in non-food sectors such as energy, oil, and household goods.

H3: Annual SPI Growth and Year-on-Year Data Analysis

In terms of year-on-year (YoY) growth, the SPI has increased by 3.57%. Several items have shown significant price hikes compared to the previous year, contributing to the overall inflationary environment:

• Ladies’ Sandals: +75.09%
• Pulse Gram: +65.64%
• Pulse Moong: +37.83%
• Powdered Milk: +25.74%
• Beef: +23.77%
• Tomatoes: +17.93%
• Garlic: +17.44%
• Potatoes: +17.31%

Other items like gas charges, shirting, and cooked dal also recorded YoY increases, indicating some inflationary pressures remain persistent.

On the flip side, there were significant declines in prices for certain items YoY, with wheat flour falling sharply by 35.40%, followed by chili powder (-20.00%), diesel (-10.77%), and petrol (-10.33%).

H2: Inflation Outlook and Projections

The overall inflation outlook has seen significant improvements recently, with the Consumer Price Index (CPI) for November 2024 registering at 4.9%. This marks a notable decrease compared to previous months, primarily due to favorable base effects.

With inflation cooling, analysts at AHL have forecasted a 200 basis point (bps) rate cut in the upcoming monetary policy meeting scheduled for December 16, 2024. This move aims to support the economy further by lowering borrowing costs and fostering investment.

H3: The Role of Consistent Policy in Controlling Inflation

Experts believe that consistent and effective policy measures are crucial to sustaining the downward trend in inflation. Waqas Ghani Kukaswadia of JS Global highlighted that while food prices have shown a positive decline, continued focus on policy and regulation will be key to strengthening the economy and maintaining lower inflation rates.

The role of government intervention in promoting market stability and regulating key sectors is central to sustaining the current positive inflation trend. By addressing the underlying structural issues and supporting local industries, Pakistan can build resilience in its economy.

FAQs:

1. What is the Sensitive Price Indicator (SPI)?
   The Sensitive Price Indicator (SPI) is a tool used to measure the price movements of essential items in Pakistan. It tracks changes in the prices of food, non-food items, and other commodities that directly affect the consumer.
2. Why have food prices fallen recently?
   The drop in food prices, including tomatoes and chicken, is mainly due to cooling inflation, better supply chain management, and seasonal factors that have helped bring down costs.
3. What items saw a rise in prices this week?
   Some items that experienced price increases this week include garlic, vegetable ghee, potatoes, petrol, sugar, and diesel.
4. How does SPI relate to inflation?
   The SPI is an indicator of inflation as it reflects price changes in goods that are most commonly consumed by the average household. When SPI increases, it suggests rising inflation, and when it decreases, inflation is cooling.
5. What is the outlook for inflation in Pakistan?
   According to analysts, inflation in Pakistan is showing signs of cooling, with a CPI of 4.9% in November. This has led to predictions of a potential 200 basis point rate cut by the central bank to support economic growth.

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Conclusion: Trends and Future Outlook

In conclusion, while the SPI has dropped for the second week in a row, food prices are on a downward trend, providing relief to consumers. However, other sectors are still witnessing price hikes, suggesting that inflation remains a mixed issue. With inflation rates cooling, the projected rate cut by the central bank could further support economic growth and consumer purchasing power. A stable policy environment will be essential to maintaining these positive trends in the long run.

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