SPI inches slightly lower as perishable food, edible oil prices decline

KARACHI: Decline in perishable food and edible oil prices helped pull weekly inflation slightly down to 0.08 percent, although the year-on-year number remained high at 37.69 percent for the seven-day period ended August 11.

Pakistan Bureau of Statistics (PBS) observed a decrease in prices of onions (10.18 percent), bananas (2.71 percent), LPG (1.1 percent), chicken (1.03 percent), vegetable ghee 1kg (0.79 percent), vegetable ghee 2.5kg (0.55 percent), mustard oil (0.36 percent), rice basmati broken (0.33 percent) and cooking oil 5 litre (0.17 percent). The joint impact of these commodities was 0.35 percent in overall sensitive price indicator (SPI) inflation for the combined group.

Fahad Rauf, head of research at Ismail Iqbal Securities in his note said SPI decreased mainly due to a decline in prices of onions. Onion prices dropped 10.2 percent WoW probably due to an improvement in the supply chain, which was disrupted by heavy rains across the country.

“Despite the current reading, we expect the inflation to remain elevated due to phase-wise increase in electricity tariff (the government has recently notified hike of Rs3.5/unit. Gas price hike is also pending,” Rauf added.

Arif Habib Limited also noted the decline in WoW numbers of SPI, though the numbers remained elevated on an annualised basis.

SPI comprises of 51 essential items collected from 50 markets in 17 cities of the country. During the week, out of 51 items, prices of 26 (50.98 percent) items increased, 9 (17.65 percent) items decreased, and 16 (31.37 percent) items remained stable.

PBS noted an increase in the prices of tomatoes (10.35 percent), salt (3.73 percent), eggs (3.67 percent), pulse mash (3.65 percent), pulse moong (3.18 percent), pulse masoor (2.13 percent), garlic (2.03 percent), firewood (1.36 percent), and Lipton tea (1.29 percent).

Different weightages are assigned to various commodities in the SPI basket. Commodities with the highest weights for the lowest quintile include milk (17.5449 percent), electricity (8.3627 percent), wheat flour (6.1372 percent), sugar (5.1148 percent), firewood (5.0183 percent), long cloth (4.2221 percent), and vegetable ghee (3.2833 percent).

Of these commodities, prices of milk, wheat flour, and firewood increased; vegetable ghee declined, whereas prices of electricity, sugar, and long cloth remained the same. However, prices of all commodities spiked higher on YoY basis except for refined sugar, which shed 16.52 percent.

Prices of vegetable ghee, an important kitchen item, have increased exponentially over last year on account of rupee devaluation. Edible oils take up a major chunk of Pakistan’s import bill, as well as household budgets. A kilo of vegetable ghee or cooking oil now costs more than 5kg of wheat flour.

Vegetable ghee 1kg jumped up by 70.54 percent to stand at Rs561/pouch over last year’s Rs329.09/pouch; whereas a 2.5kg tin increased by 67.61 percent to Rs1,425.23/tin compared to last year’s Rs850.35/tin. Same goes for cooking oil, which is now priced at Rs2,906.41/5kg tin, up 73.5 percent, from Rs1,675.17/5kg tin last year.

These changes have impacted all expenditure groups; divided in five quintiles by the PBS. For the groups spending up to Rs17,732; Rs17,733-22,888; Rs22,889-29,517; Rs29,518-44,175; and above Rs44,175; YoY SPI increased 31.87, 37.34, 35.27, 35.23, and 37.87 percent, respectively.