Sensitive Price Indicator (SPI)

The Sensitive Price Indicator (SPI) is a weekly price index published by the Pakistan Bureau of Statistics (PBS) that tracks the retail prices of 51 essential goods and utilities, such as wheat flour, rice, pulses, cooking oil, sugar, milk, eggs, vegetables, LPG and electricity. Prices are collected from 50 markets in 17 cities, and the result is released every week so that the government can follow short-term movements in the cost of everyday necessities.

The SPI is a Pakistan-specific measure. It complements the monthly Consumer Price Index (CPI), which is the official gauge of inflation, and the monthly Wholesale Price Index (WPI). Its base year is 2015-16, the same base used for Pakistan's other price indices and its national accounts.

Imagine a household that keeps a small notebook by the kitchen door and, every Thursday, writes down what it paid for flour, sugar, tomatoes, milk and a gas cylinder. After a few months the notebook shows at a glance whether the weekly shop is getting dearer. The SPI is that notebook, kept by the national statistics office for the whole country.

It does not try to cover everything a family spends money on. It leaves out rent, school fees and most services, and looks only at the staples whose prices people notice first and that matter most to poorer families. That is why it is called "sensitive": it reacts fast to the prices people feel most.

PBS field staff collect retail prices for the 51 items each week from 50 markets in 17 cities, taking several price quotes per item in every market. Each item has a weight taken from household spending patterns in the base year, drawn from a national household income and consumption survey, and city results are combined with population weights. The weekly figure is then compared with the previous week and with the same week a year earlier.

A typical weekly release reports three things:

• The week-on-week change. The percentage change in the combined index since the previous week.
• The year-on-year change. The change against the same week one year earlier, which is the figure most often quoted in the press.
• Item movements. How many of the 51 items rose, fell or stayed unchanged, with the largest movers named.

Besides a combined index, the SPI is calculated separately for five groups of households, ranked by their monthly consumption spending (quintiles). Under the 2015-16 base the lowest group covers households spending up to Rs 17,732 a month, and the top group the highest spenders. Before the 2015-16 rebasing these groups were defined by income; PBS switched to consumption quintiles because spending data are thought to be more reliable than reported income.

Because each group spends a different share of its budget on food and fuel, the same price changes can give each quintile a different SPI reading. When flour or vegetable prices jump, the lowest group usually records the highest rate, which lets policymakers see how hard price pressure is hitting the poorest households and adds detail that the national CPI average hides. It also helps when judging the reach of an informal or cash-based economy, where much of daily shopping happens in cash at small markets.

The SPI is mainly an early-warning and monitoring tool. Federal and provincial governments use it to watch the prices of staples, to decide on market interventions such as releasing wheat stocks, and to check on price controls. The press follows it closely because it gives a reading on purchasing power four or five times a month, long before the monthly CPI appears.

Big moves in the index often follow changes in administered prices, such as electricity and gas tariffs, petrol prices, a fall in the Pakistani Rupee (PKR) that raises import costs, or seasonal swings in onion and tomato prices. These are the same supply and demand shocks that later show up in the CPI.

The SPI is not Pakistan's official inflation rate, and its figures should not be compared one-for-one with CPI inflation. Its main limits are:

• Narrow basket. With 51 items and few services, it leaves out large parts of household spending such as rent, health and education.
• Urban coverage. Prices come from 17 cities only, so rural prices are not covered.
• Volatility. Perishable foods and fuel dominate, so weekly readings can swing sharply and reverse within weeks.
• Base-year drift. Weights fixed in 2015-16 may no longer match what households buy today.

For monetary policy, the State Bank of Pakistan targets CPI inflation, not the SPI, though it reads the weekly index as a sign of where food and energy prices are heading. Economists also compare it with money measures such as Broad Money (M2) and currency in circulation, and with the economy-wide GDP deflator, to separate short-lived food shocks from broader price trends. Sustained double-digit SPI readings, as in 2022-23, usually reflect higher energy costs and changes in indirect tax rates, and feed into wage demands and a cost of living adjustment (COLA) in public pay. In the worst episodes elsewhere, unchecked price spirals have turned into hyperinflation, which is why weekly monitoring of staples matters to central banks and governments.

• Pakistan Bureau of Statistics: Price Statistics