The government has commenced rejoicing over the diminishing trajectory of commodity costs. While inflationary pressures have eased significantly compared to the turmoil witnessed months before, the cost of living remains burdensome, placing essential goods and services beyond the financial grasp of the populace. It is a fact that struggling households continue to grapple with exorbitant tariffs on electricity, fuel, and staple vegetables, which have shown only marginal reductions in recent months.

According to the latest survey released by IPSOS, a Paris-based analytics firm, inflation persists as the predominant anxiety for households across Pakistan, with 69% of respondents highlighting it as their principal concern. The country’s headline inflation moderated to 4.9% year-on-year in November 2024, a substantial decline from the preceding month’s 7.2%. Yet, despite reaching a six-year nadir, 65% of survey participants regard the national economic framework as precarious. The Pakistan Bureau of Statistics (PBS) attributes this deceleration in inflation to a high base effect and the moderation of prices for non-perishable commodities. Nonetheless, a staggering 93% of households report discomfort in making routine purchases, and a meager 4% express confidence in undertaking major expenditures during the July-October interval. This undercurrent of economic disquiet underscores a widespread erosion of purchasing power.

The survey further identifies unemployment and escalating poverty as the second and third most pressing societal grievances, respectively, with an increasing tax burden ranking as the fifth. Although economic unease has softened in 2024, the proportion of respondents naming inflation as their primary worry has decreased by 16% compared to the previous year. IPSOS also disclosed that 79% of respondents believe Pakistan is veering in an adverse direction, although there has been a slight uptick in optimism, rising to 19% from a paltry 11% in the prior quarter. Among women, optimism remains notably subdued, with only 14% perceiving a positive national trajectory, compared to 23% among men. Concerns over job security remain acute, with 85% expressing unease as the growth of large-scale manufacturing remains tepid.

Perceptions of economic vigor are polarized; one-third of the populace deems the economy robust or moderate, whereas two-thirds describe it as feeble. Among postgraduate participants, a disheartening 85% classify the economy as deteriorated. Furthermore, only 25% anticipate any economic amelioration within the next half-year. Financial confidence languishes, with just 20% expecting improvements, although pessimism regarding financial prospects has lessened, falling from 67% to 58%. IPSOS highlighted nascent signs of external sector stabilization, citing a contained current account deficit, bolstered exports and remittances, and a relatively steady exchange rate.

Short-term inflation, quantified by the Sensitive Price Index (SPI), abated to 3.57% year-on-year in the week concluding December 5, primarily due to bearish trends in vegetable and pulse prices. The SPI-based inflation has subsided for two consecutive weeks, declining by 0.34% from the prior week, as per official statistics. Earlier in March, the SPI’s descent followed an unrelenting 11-week surge exceeding 40%, peaking at 48.35% year-on-year in early May 2023 before receding to 24.4% by late August 2023, only to climb past 40% again in mid-November.

On December 1, 2024, the PBS reported a 4.9% Consumer Price Index, reflecting a 2.3% reduction from the previous month. This announcement prompted the Prime Minister to laud the “historic decline” in inflation, expressing optimism that it would catalyze a reduction in the discount rate.

The Prime Minister’s economic logic maybe impeccable but his optimism my not be shared by the general public or economists for that matter. The general public failed yet again to experience any feel-good factor due to a decline in CPI because the day before the lower rate was announced, on 30 November, the government raised petroleum prices effective December 1.

This age-old formula requires a revisit, given the 41 percent poverty levels in this country. In addition, while the CPI does not specify the precise weightage it gives to fuels as it lumps housing, water, electricity, gas and fuels together with a combined weightage of 23.63%, yet the linkage between the lower the income the higher the kitchen budget outlay on fuel is well established in surveys.

In addition, transport has a weightage of 5.91 percent whose indices as per the PBS rose marginally – from 299.63 in October to 301.798 in November. The two items taken together reveal that if wages do not rise, and the wages of the private sector providing employment to 93 percent of the country’s entire workforce have not risen for more than five years, the general public, 41% living below the poverty line, is unlikely to experience a rise in their disposable income.

The pace of increase in prices may have come down but the cost of living remains steep. The nominal earnings of middle-income homes have not risen as much as prices in the last couple of years. They are worse off because their purchasing power or inflation-adjusted real income has fallen drastically, forcing most people to downgrade their standard of living. The worst part of inflation is that there is no hope of real incomes going up anytime soon as economic growth is projected to remain at its weakest level despite the recovery in macroeconomic fundamentals. In this situation, the chances of any improvement in the lives of the common people remain dim in the foreseeable future.