Weekly inflation peaks over 2 years due to soaring fuel prices

KARACHI: Weekly inflation jumped to more than two years following the government’s decision to start cutting gasoline and diesel subsidies last week for seeking IMF approval to resume the mechanism of expanded funding.

Data from the Pakistan Bureau of Statistics (PBS) showed that the Sensitive Price Indicator (SPI) inflation for the seven-day period ended June 2, 2022 rose 2% week on week. another and 20.04% over one year, mainly due to the rise. food and oil prices.

An increase was observed in the prices of high-speed diesel (20.69%), gasoline (19.91%), potatoes (9.08%), eggs (6.38%) , vegetable ghee 1 kg (4.59%), bread (2.72%), mustard oil. (2.65%), masoor of legumes (2.33%), cooking oil 5 liters (2.18%), gram of legumes (1.99%), sugar (1.93%), cooked beef and puree of legumes (1.69%) each, vegetable ghee 2.5 kg (1.51%), bananas (1.35%) and toilet soap (1.4%). The combined impact of these products on the combined group was 2.09% in the overall SPI.

Topline Securities in its note commented that this was the largest weekly increase after February 25, 2021.

The latest high of 2.41% in WoW SPI was recorded during the week ending February 25, 2021, while 20.08% was recorded during the seven-day period ending January 6, 2022.

Analyst Fahad Rauf of Ismail Iqbal Securities said the SPI rose 2% WoW mainly due to the sharp increase in gasoline prices. “With an increase of Rs60/litre, the government has significantly reduced oil subsidies. The government also plans to raise electricity prices in July. These measures, according to the analyst, would likely impact the prices of many other goods and services in the coming months, leading to high inflation.

“Based on current figures, we expect the CPI (consumer price index) to reach 16.7% in June 2022 from 13.8% in May,” he added.

The PBS data assigns different weights to the products in the SPI basket. The products with the highest weights for the lowest quintile are milk (17.5449%), electricity (8.3627%), wheat flour (6.1372%), sugar (5. 1148%), firewood (5.0183%), long cloth (4.2221%) and vegetables. ghee (3.2833 percent).

Among these products, the WoW prices for milk, sugar and vegetable ghee have increased; the price of wheat flour has fallen; while the prices for electricity, firewood and long sheets remained the same. On an annual basis, a decrease was recorded in the prices of wheat flour, sugar and electricity; the rest of these products recorded a price increase.

The government raised the prices of petrol, high speed diesel, kerosene and light diesel by Rs 30 per liter from Friday 27th May 2022. On 2nd June, just a week after the hike, the government raised prices again by Rs30/litre bringing petrol to Rs209.86/litre, diesel to Rs204.15/litre, light diesel to Rs178.31 and kerosene to Rs181.94/litre .

This major change in rates would be reflected in the coming week. In the SPI basket, the weighting of gasoline stands at 6.7%, while the HSD stands at 0.087% for the combined group. During the week, out of 51 items, the prices of 28 items increased, 5 items decreased, while the prices of 18 items remained unchanged. For groups spending up to Rs17,732; 17,733-22,888 rupees; Rs22,889-29,517; Rs29,518-44,175; and above Rs44,175; WoW SPI increased by 1.02, 1.27, 1.41, 1.7, and 2.44%, respectively.

The SPI was recorded at 178.12 points against 174.62 points recorded previously.