Tag: Inflationary Pressures

  • Pakistanis catch a break as weekly inflation hits 18-week low

    Pakistanis catch a break as weekly inflation hits 18-week low

    Short-term inflation in Pakistan dipped to 29.06 per cent year-on-year by the week ending March 21, stepping down from its prolonged stint above 30 per cent for the past 18 weeks, as per recent official data.

    The pullback in weekly inflation, tracked by the Sensitive Price Index (SPI), was primarily attributed to a drop in the prices of key staples like tomatoes, onions, and potatoes. The SPI noted a 1.13 per cent week-on-week decrease as of March 21, down from 32.89 per cent recorded in the previous week.

    This follows an unbroken 11-week stretch of inflation topping 40 per cent, starting from 29 per cent noted on November 8, 2023. The surge was largely fueled by upticks in gas prices, electricity tariffs, and essential kitchen item costs.

    Weekly inflation peaked at a record 48.35 per cent year-on-year in early May 2023, before cooling off to as low as 24.4 per cent in late August 2023, only to surge past 40 per cent again by the week ending November 16, 2023.

    Among the notable declines in prices on a week-on-week basis were tomatoes (36.73 per cent), onions (19.58 per cent), potatoes (4.02 per cent), garlic (2.87 per cent), pulse mash (1.25 per cent), wheat flour (1.02 per cent), sugar (0.95 per cent), pulse masoor (0.86 per cent), and diesel (0.60 per cent).

    Conversely, significant increases were seen in the prices of LPG (1.49 per cent), shirting (0.74 per cent), beef (0.53 per cent), rice basmati broken (0.48 per cent), mutton (0.42 per cent), mustard oil (0.40 per cent), rice irri 6/9 (0.25 per cent), powdered milk (0.14 per cent), and georgette (0.03 per cent) compared to the previous week.

    On an annual basis, notable price hikes were observed in gas charges for Q1 (570 per cent), chilli powder (86.05 per cent), gents sponge chappal (58.05 per cent), garlic (57.41 per cent), onions (54.65 per cent), gents sandal (53.37 per cent), gur (39.86 per cent), sugar (35.01 per cent), salt powder (33.29 per cent), energy saver (29.83 per cent), and pulse mash (27.31 per cent).

    In contrast, certain items witnessed declines, with cooking oil 5-litre dropping by 21.35 per cent, followed by vegetable ghee 2.5 kg (18.48 per cent), vegetable ghee 1 kg (18.44 per cent), mustard oil (13.90 per cent), bananas (13.52 per cent), diesel (2.47 per cent), and cigarettes (0.06 per cent).

    The short-term inflation, gauged through the SPI, stood at 323.50, compared to 327.21 in the preceding week and 250.66 a year ago. Comprising 51 items collected from 50 markets in 17 cities, the SPI is calculated weekly to monitor the prices of essential commodities and services at shorter intervals. Data indicates that prices of nine items increased, 17 items decreased, and 25 items remained stable compared to the previous week.

  • SBP data reveals 23.5% YoY decline in auto loans

    SBP data reveals 23.5% YoY decline in auto loans

    In October, auto loans faced a decline for the 16th consecutive month due to high interest rates and inflation, as per data released by the State Bank of Pakistan (SBP).

    According to the SBP, auto loans witnessed a year-on-year drop of 23.5 per cent, amounting to Rs264 billion, and a month-on-month decrease of 3 per cent, down from Rs272 billion in September.

    While auto loans had peaked at Rs368 billion in June 2022, a subsequent decrease of Rs104 billion, or 28 per cent, occurred. This decline followed the SBP’s implementation of tighter monetary policies to address inflation and external imbalances.

    Financial analysts attribute this trend to the SBP’s measures, including elevated interest rates and the rupee’s significant depreciation against the dollar.

    These factors have led to increased costs in car financing and higher car prices, rendering them unaffordable for many consumers. The surge in inflation has further diminished consumer purchasing power.

    An analyst stated, “The auto sector bears the brunt of high interest rates and currency devaluation, rendering car financing and prices prohibitively expensive.”

    Despite recent price reductions by some car manufacturers, the anticipated boost in demand has not materialized. Consumers continue to grapple with high inflation and limited disposable income.

    Data from the Pakistan Automotive Manufacturers Association (PAMA) reveals a 44 per cent decline in car sales, totaling 27,163 units in the first four months of the current fiscal year, commencing in July.

    The SBP has aggressively increased its policy rate by a cumulative 15 percentage points to 22 per cent since September 2021, marking one of the world’s highest rates.

    Speculation suggests that the SBP will initiate a monetary policy easing in the first half of 2024, anticipating a relief in inflationary pressures and an improvement in foreign inflows to enhance the country’s external position.

    SBP data indicates a 0.8 per cent decrease in bank loans to the private sector, amounting to Rs8.10 trillion in October.

    Consumer loans, including an 8 per cent drop to Rs829 billion, witnessed personal loans declining by 4 per cent to Rs246 billion and housing loans falling by 2.7 per cent to Rs207 billion.

    Analysts predict an upswing in credit to the private sector in the coming months, as decreasing interest rates, fiscal consolidation, reducing crowding out, and improved foreign inflows are expected to alleviate liquidity constraints.

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

    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.