EDITORIAL: The Pakistan Bureau of Statistics (PBS) reported that the Sensitive Price Indicator (SPI) declined by 1.34 percent in the week ending 18 September. The index fell from 335.35 to 330.84, according to PBS’s weekly release.
While this offers temporary relief in reported retail inflation, the decline was driven almost entirely by perishables and electricity charges, while staples and fuels continued to rise. When placed in the context of Pakistan’s inflation dynamics and monetary policy stance, the latest SPI data raises more questions than answers.
The breakdown makes this clear. Tomato prices fell by 23 percent in a single week, chicken’s dropped nearly 13 percent, and electricity charges were revised lower by just over 6 percent. These items pulled the index down.
At the same time, diesel prices soared by one percent, eggs’ by nearly the same, while the rates of rice, sugar, ghee and beef all moved up. These are not one-off luxuries but the anchors of household consumption.
Relief in one week of tomato prices does not offset the pressure of wheat flour, fuel and sugar costs on disposable incomes.
Year-on-year, SPI is still higher by 4.17 percent. For households, that figure carries more weight than the week-to-week swings, because it captures the erosion of real income over the longer term.
And, it is precisely these retail-level items that dominate the household budget. Poorer quintiles continue to face the steepest burden, because their spending is concentrated in food and fuel
The tendency of policymakers to dismiss SPI as a noisy index is misplaced. An analysis of the CPI basket shows that roughly 45 percent of CPI’s weight is directly covered by SPI items. Food staples, ghee and oil, sugar, electricity, gas, motor fuels, and transport fares all appear in both indices. That means sustained increases in SPI inevitably bleed into CPI with a lag. This linkage matters.
A monthly CPI run rate of just 0.58 percent is enough to breach the State Bank’s seven percent medium-term inflation target. With almost 40 percent of CPI explained by SPI-type items, even modest monthly jumps in wheat, sugar, or fuel are sufficient to push headline CPI above target.
The assumption that the disinflation trend shall persist in future is tenuous at best and should give fiscal managers pause. Floods have once again disrupted perishable supply chains, and experience shows that post-flood months are a fertile ground for shortages and speculative hoarding.
Wheat volatility has returned as procurement and import decisions remain opaque. Sugar markets are distorted, and the petroleum levy remains a fiscal crutch at a time when global oil markets are turning volatile again. These are precisely the channels through which SPI pressure feeds into CPI, jeopardizing the 7 percent inflation target.
The credibility risk is two-sided. For households, weekly declines in SPI offer little comfort when their cumulative burden continues to rise.
Public expectations are anchored not on statistical averages but on kitchen economics: wheat flour, cooking oil, fuel and utility bills. For markets, credibility is undermined if CPI breaches the target just as the monetary easing cycle stands at the precipice. A central bank that moves too early risks losing the very inflation anchor it worked hard to rebuild over the past two years.
The lesson is that short-term declines in volatile items cannot be spun as evidence of inflation control.
What matters is whether the structural drivers of retail inflation are being addressed. That means clarity and transparency in wheat and sugar policy, investment in cold storage and logistics to smooth out perishable supply, and a more disciplined approach to energy pricing that does not swing between populist freezes and lender-driven shocks.
Until then, the SPI will continue to swing from week to week, offering brief statistical reprieve while the lived experience of inflation remains harsh. The PBS report of 18 September should be read as noise rather than signal.
The signal remains clear: Pakistan’s inflation problem is not resolved, and premature rate cuts on the back of such noise only heighten the risks. Inflation credibility will be restored only when the public and markets alike believe that the state has a grip on the structural drivers of prices, not just on the optics of temporary relief.
Copyright Business Recorder, 2025