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Consumer Confidence Index
EDITORIAL: The Consumer Price Index (CPI) was calculated at its peak since 2022 based on interviews conducted April-May 2025 by Dun and Bradstreet Pakistan and Gallup Pakistan — confidence in the overall economic environment and individual company's financial conditions. Dun and Bradstreet's main objective is to provide information to businesses (including credit information reports, business ratings and compliance solutions) but has limited followers on the internet — around 14,000 followers on Linkedin — who, one can assume, are largely if not entirely from the business community, which is not identified as large-scale, medium scale or small scale, or a combination of the three. Gallup Pakistan has been collecting and collating data on political, social and economic subjects. The combined effort of these two agencies to calculate CPI would, one may assume, provide insights into the opinions of the business community as well as the general public.
The conclusion that CPI has peaked since 2022 at 96.2 January-March 2025 against 88.1 April-May 2025 (with 100 defined as neutral benchmark and a score below indicative of consumer pessimism) was reached. Two observations are in order. First, there is a need to clarify whether there was any hint of influence or coercion used to measure three-month data against only two months, especially as the calculation was not of key macroeconomic indicators that may have provided useful ins and outs for the budget formulators. And secondly, while the score remains under 100 which indicates pessimism as opposed to optimism yet it would be interesting to get clarity as to why the 8 percentage point improvement is being highlighted at a time when the budget itself is being dismissed by many an economist as lacking realism.
Be that as it may, the consumer sentiment was premised on four indications: (i) household financial situation; (ii) macroeconomic situation; (iii) unemployment; and (iv) household savings. And this makes the claim of an improvement in sentiment baffling as the household financial situation remains a source of concern for those employed in the private sector as pay has been frozen or at best raised at less than the rate of inflation for the past five years — a condition which excludes the 7 percent of the country's total workforce employed by the government budgeted each year to receive a pay rise higher than inflation at the taxpayers' expense.
The macroeconomic situation has improved as growth was in the positive realm in the outgoing fiscal year; however, it must be borne in mind that the country's foreign exchange reserves remain hostage to 16 billion-dollar rollovers with China reportedly agreeing to 1.8 billion dollar rollover but resistant to reschedule concessional loans, preferential buyers credit, and credit from Export Import Bank of China. While our rupee-dollar parity remains remarkably constant yet there are growing concerns that the International Monetary Fund may seek a more stringent condition than a differential between the market and the interbank rate.
Unemployment is above 20 percent according to independent economists and household savings largely banked in the National Savings Centre are projected in the budget 2025-26 to fall from 164 billion rupees in 2024-25 to 141.2 billion rupees next fiscal year. This is due to the expected reduction in the discount rate which, in turn, an expectation that has led to a massive containment of mark-up payments — from 54.5 percent of the total current expenditure as per the revised estimates of 2024-25 to a commendable though unrealistic 50.3 percent in 2025-26.
To conclude, sentiments do respond to market conditions but are susceptible to change at a moment's notice as was evident in 1997 Asian Financial crisis. In Pakistan the State Bank of Pakistan routinely conducts business sentiment surveys, quoted in the Monetary Policy Statement which for the past year has been claiming that business sentiment has improved and will fuel productivity; however, the large-scale manufacturing sector (LSM) index has remained in the negative realm for the past three years. Surveys have their own relevance in all countries but there is a need to align market sentiment with key LSM data in Pakistan for greater credibility.
Copyright Business Recorder, 2025
