SPI Update. Mild Inflation, Food Prices Rising and Transport Costs Climbing

For the week ending February 20, 2025, the Sensitive Price Indicator (SPI) saw a modest weekly increase of 0.27%, signaling a slight rise in inflation. On a yearly basis, the SPI grew by 1.2%, which is a more stable figure compared to the higher inflation observed in mid-2024.

The week-on-week increase was mainly driven by price hikes in staple food items, including bananas (11.89%), eggs (7.80%), chicken (4.47%), garlic (1.08%), sugar (0.65%), beef (0.52%), and mutton (0.22%).

On the flip side, several items experienced price drops, including tomatoes (-2.81%), diesel (-1.49%), onions (-1.16%), potatoes (-0.90%), and petrol (-0.36%). Of the 51 items tracked, 11 saw price increases, 16 declined, and 24 remained stable.

Year-over-year, significant price surges were seen in ladies' sandals (75.09%), pulse moong (28.07%), powdered milk (25.84%), beef (22.47%), potatoes (20.71%), and vegetable ghee (16.41%). Meanwhile, reductions were noted for tomatoes (-58.82%), onions (-49.86%), wheat flour (-37.05%), and diesel (-8.07%).

According to Arif Habib Limited, headline inflation for February 2025 is anticipated to dip to a 112-month low of 2.2% YoY, down from 2.4% in January. On a monthly basis, inflation is expected to decrease by 0.21%, marking the lowest rate since October 2015.

For the first eight months of FY25 (8MFY25), the average inflation rate is estimated at 6.04%, a dramatic drop from the 28% recorded in the same period of FY24. Food inflation is projected to decline 1.1% month-on-month (MoM) and 2.6% year-on-year (YoY), driven by price reductions in wheat flour (-1.6%), eggs (-10.8%), potatoes (-22.2%), onions (-24.9%), and tomatoes (-51.7%).

The housing and energy index is expected to fall by 0.3% MoM, mainly due to a 1.3% drop in electricity prices, resulting from a negative fuel cost adjustment (FCA) of Rs1.23 per kWh for December 2024, compared to Rs0.76 in the previous month.

The transport index is projected to rise by 1.1% MoM, driven by increases in petrol and diesel prices. However, transport inflation is 0.3% lower on a YoY basis, thanks to a high base effect from the prior year.