How Inflation Shapes Pakistan's Economy

Kickoff

Inflation isn’t just a buzzword thrown around by economists or flashy headlines—it’s a reality that touches every corner of Pakistan's economy, from the bustling markets of Karachi to the quiet farms in Punjab. For traders, investors, analysts, and educators, understanding inflation is like having a compass in a storm—it helps navigate the chaos and make informed decisions.

In Pakistan, inflation acts like a slow but steady tide, pushing prices up on everyday essentials such as food, fuel, and electricity. What seems like simple price hikes actually ripple through the economy, affecting purchasing power, investment choices, and even government policies.

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We’ll explore why inflation happens here—looking at local and global forces, such as fluctuating oil prices and currency devaluation. Then, we'll break down how inflation impacts various sectors including agriculture, manufacturing, and services. This isn’t just about numbers rising on paper; it’s about real people struggling to keep up with the cost of living.

Inflation shapes how the economy breathes and ticks. Ignoring it is like driving blindfolded—dangerous and costly.

This guide aims to strip away the jargon and paint a clear picture, equipping you with the insights you need to understand Pakistan’s economic pulse and how inflation fits into the puzzle. Whether you’re making investment calls, teaching economics, or analyzing market trends, this article will give you practical, clear information relevant to the current economic climate.

Let's get down to the brass tacks and see why inflation matters for Pakistan today.

Understanding Inflation and Its Causes

Understanding inflation is foundational when analyzing Pakistan's economic challenges and prospects. Inflation isn’t just about prices going up—it reflects shifts in demand, supply, and policy effects that ripple through everyday life and business operations. For traders, investors, and analysts, grasping the causes behind inflation helps in making informed decisions, anticipating market trends, and assessing risks accurately.

Take, for instance, the food price surge in rural Sindh. Without pinpointing whether this surge stemmed from demand pressure, supply bottlenecks, or structural inefficiencies, stakeholders might misjudge its wider economic impact. This section gives clarity on these causes, enabling a nuanced view useful for making predictions and crafting strategies.

What is Inflation?

Inflation refers to the general rise in prices of goods and services over time within an economy. Practically, it means that the purchasing power of money declines—you need more rupees today to buy what you bought for less yesterday. This phenomenon affects everything from the grocery bill of a household to the capital budgeting decisions of a firm.

In Pakistan, inflation’s relevance is particularly acute because it directly affects living costs and investment. For example, when inflation hits double digits, the real wages of many workers effectively shrink, even if their salaries remain the same. This can reduce consumer spending and slow economic growth. Recognizing inflation’s traits, such as its persistence or volatility, informs policies and personal financial strategies.

Inflation is essentially a signal—indicating shifts in economic conditions that demand attention from all economic segments.

Key Drivers of Inflation in Pakistan

Demand-pull inflation

Demand-pull inflation occurs when the demand for goods and services outpaces the economy’s production capacity. In Pakistan, this can happen during periods of rapid economic growth or fiscal stimulus, where consumers and businesses spend more, but supply chains can’t keep up.

For example, during festive seasons, increased consumer spending can boost demand for household items faster than manufacturers can supply them, pushing prices upward. Similarly, higher remittances from abroad fuel domestic spending power, which can tilt demand beyond supply capacity if producers don’t scale in time.

Cost-push inflation

Cost-push inflation arises when production costs increase, which then gets passed on to consumers. Key factors include rising fuel prices, higher import tariffs, or wage hikes.

In Pakistani agriculture, for instance, rising diesel costs can increase farming expenses, exporting the inflation burden onto food prices. When inflation spikes this way, it tends to stick around longer because businesses pass these costs downstream rather than absorb them. Investors watching sectoral margins often spot signs of this in rising input price indexes.

Structural factors

Structural inflation results from inefficiencies within the economic framework, such as poor infrastructure, market monopolies, or supply chain disruptions.

Pakistan’s dependence on imported machinery or raw materials exposes its economy to international price shocks and currency depreciation. Transportation bottlenecks or energy shortages further restrict production efficiency. An example is the textile sector facing delays due to irregular power supply, pushing up costs and prices regardless of demand conditions.

Understanding these deeper structural elements provides context beyond surface-level price changes, helping analysts see why inflation lingers or behaves unexpectedly.

In sum, knowing what inflation really is and the forces behind it—not just its numbers—helps various economic actors navigate Pakistan’s market with better foresight and adapt to a shifting economic environment.

Measuring Inflation in Pakistan

Measuring inflation is a cornerstone for understanding economic health in Pakistan. Without accurate inflation data, policymakers, traders, and investors would be flying blind. It directly influences decision-making—from adjusting interest rates to setting wages and planning investments. In Pakistan, measuring inflation helps gauge how price changes affect everyday life and the broader economy, offering a snapshot of purchasing power shifts and cost pressures across sectors.

By keeping track of inflation, analysts can spot trends—whether prices are rising because of increasing demand or supply-side costs—and predict potential economic challenges. For instance, when the Consumer Price Index (CPI) rises sharply, it signals the cost of living is going up, which can push the government to take steps to support vulnerable groups. Likewise, businesses adjust pricing strategies based on inflation data to protect profit margins. The practical benefits are clear: transparent, accurate inflation measurement supports informed, timely economic actions.

Consumer Price Index and Wholesale Price Index

In Pakistan, the two main inflation gauges are the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). The CPI tracks changes in prices of goods and services bought by urban and rural households—think food, transportation, and utilities. It's the most common metric because it reflects what consumers actually pay out of pocket. For example, if wheat prices surge, it directly shows up in the CPI and alerts households that their daily bread will cost more.

The WPI, on the other hand, measures price changes at the wholesale level—before products reach consumers. This index includes raw materials, intermediate goods, and finished products sold between businesses. In Pakistan, WPI often signals cost pressures earlier in the supply chain, such as rising petroleum prices or increased costs for steel and cotton. For manufacturers and traders, the WPI is a valuable tool to anticipate how wholesale cost changes might trickle down to consumers.

Understanding how CPI and WPI interact helps businesses and policymakers spot inflation trends earlier and respond accordingly. For example, a steady rise in WPI without a matching increase in CPI might indicate that manufacturers are absorbing extra costs temporarily, which could affect profitability down the line.

Challenges in Accurately Measuring Inflation

Measuring inflation precisely in Pakistan comes with its own hurdles. The country's diverse geography and varied economic conditions mean that price changes aren't uniform everywhere. For instance, inflation in urban hubs like Karachi or Lahore can differ substantially from rural districts in Khyber Pakhtunkhwa or Balochistan. Regional variations in goods availability, transportation costs, and quality make it tough to compile a single, representative inflation figure.

Data limitations also pose challenges. Pakistan’s vast informal economy isn’t fully captured by official statistics, leading to underestimation in some sectors. Additionally, frequent disruptions such as sudden currency devaluations or supply shocks from natural disasters can skew short-term inflation data. The Pakistan Bureau of Statistics strives to update methods and includes a diverse basket of goods, but occasional lags and data gaps remain.

Inflation measurement is as much an art as it is a science—it depends on sampling accuracy, timely data collection, and an understanding of local economic nuances.

Addressing these challenges requires continuous refinement of data collection, including expanding the sample sizes across different regions and sectors. For investors or policymakers relying on inflation trends, it’s essential to consider these regional and sectorial nuances rather than relying solely on national averages. This nuanced view leads to better-targeted policies and investment decisions with less risk of misjudging the economic climate.

Understanding these indexes and their limitations gives traders, brokers, and analysts a clearer picture of the Pakistani economy’s pulse, allowing more grounded and strategic decision-making.

Effects of Inflation on the Economy

Inflation has a direct and noticeable effect on the everyday functioning of an economy, touching on everything from how much families can buy to how businesses plan for the future. In the context of Pakistan, where inflation rates can swing quite a bit, understanding these effects is essential for anyone dealing with the market, be it traders, investors, or policymakers. When prices increase steadily over time, it means the purchasing power of the Pakistani rupee drops — what you could buy for 1000 PKR last year might cost significantly more today.

Impact on Purchasing Power and Living Standards

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Inflation chips away at the buying power of households, especially those on fixed incomes or low wages, as the cost of basic necessities like food, fuel, and clothing rises. For instance, a worker in Lahore who earned 30,000 PKR a month last year may find their salary doesn’t stretch as far when the prices of essentials jump by 15%. This erosion forces families to cut back on discretionary spending, which in turn slows down economic activity in sectors like retail and entertainment.

Households often respond by prioritizing their expenses—focusing on must-haves and delaying or avoiding purchases like electronics or home repairs. This behavior not only affects individual well-being but can also dampen business revenues. The challenge is more severe in rural areas where incomes tend to be lower and inflation in food prices hits harder. Understanding these consumer shifts helps analysts predict changes in demand patterns and adjust economic forecasts accordingly.

Inflation and Business Costs

For businesses, rising inflation means higher costs for raw materials, energy, and wages, squeezing profit margins. Take the textile industry, a significant part of Pakistan’s manufacturing sector: if the price of cotton climbs due to inflation, manufacturers face tough choices—absorb the extra cost, reduce workforce hours, or increase the price of finished products. Each choice carries risks, such as losing customers or losing employees.

Inflation also introduces uncertainty about future costs, making it difficult for businesses to plan investment or expansion. When the economy feels like a roller coaster, entrepreneurs may hold back on buying new machinery or hiring additional staff. This hesitation slows economic growth and can contribute to higher unemployment if the trend persists. Hence, companies often employ strategies like bulk purchasing or negotiating long-term contracts to protect themselves from sudden cost spikes.

Inflation's Influence on Interest Rates and Currency

The State Bank of Pakistan usually responds to inflation by adjusting interest rates to either cool down or stimulate the economy. For example, when inflation rises sharply, the central bank might hike rates to discourage borrowing and slow spending. This policy tool helps contain price rises but also increases the cost of loans for businesses and consumers, impacting everything from mortgages to small business financing.

Another dimension is the effect of inflation on the Pakistani rupee’s exchange rate. Inflation generally weakens the currency, as higher price levels make exports less competitive and can scare off foreign investors. This was evident when the rupee depreciated significantly against the US dollar during periods of high inflation, pushing import costs upward and fueling further inflation in a vicious cycle.

For investors and traders, monitoring the interplay between inflation, interest rates, and currency movements is crucial. It informs decisions on portfolio allocation, risk assessment, and market timing.

Overall, inflation's ripple effects across purchasing power, business costs, and monetary policy shape the economic landscape of Pakistan. Being aware of these mechanisms allows stakeholders to make smarter, more informed choices in their financial and business activities.

Sector-Specific Impacts of Inflation

Understanding how inflation impacts different sectors is key when assessing the overall health of Pakistan’s economy. Inflation doesn’t hit all parts of the economy equally—it reshapes cost structures, income flows, and pricing strategies in ways that vary significantly from agriculture to industry to services. Recognizing these sector-specific effects helps investors, policymakers, and business owners make informed decisions amid rising prices.

Agriculture and Rural Economy

Inflation hits the agriculture sector by pushing up the prices of inputs like seeds, fertilizer, and fuel. For instance, in Pakistan, farmers often face increased costs for urea and DAP fertilizers, which can spike quickly during inflationary phases. With input costs rising faster than crop prices, many small-scale farmers find their profit margins squeezed tightly.

At the same time, unpredictable inflation affects farmers’ income stability. When the cost of machinery repairs or irrigation rises unexpectedly, farmers must adjust budgets, sometimes reducing investment in future crops. This can lead to lower productivity and slower rural economic growth. Practical advice for those in rural areas includes looking for input purchase cooperatives or bulk buying to lessen the inflation impact, and exploring crop insurance schemes to guard against income shocks.

Manufacturing and Industry

Manufacturing firms feel inflation most keenly through volatile raw material prices. In Pakistan’s textile industry, for example, sudden increases in cotton prices can erode profit margins, forcing factories to either raise prices or eat the costs. These fluctuations often complicate planning and investment, since fixed contracts may not anticipate sharp inflation swings.

Furthermore, inflation can lead to higher operational expenses like energy costs, transportation, and wages, exerting additional pressure on manufacturers. Firms can benefit from diversifying their supplier base or investing in energy-efficient technology to dampen these effects. Close monitoring of input cost trends helps firms develop more accurate pricing models and avoid margin erosion.

Services Sector

The services sector, especially retail and transportation, adjusts wages and pricing differently under inflationary pressures. Employees often demand higher wages to keep up with living costs, but businesses may hesitate to push prices upwards too quickly for fear of losing customers. For example, local transport operators in Karachi face rising fuel costs but must balance fare increases against passengers’ affordability.

Adjusting pricing in services requires sensitivity and careful timing. Service providers might introduce tiered pricing or bundle offers to maintain revenue without alienating price-sensitive clients. Employees’ wage demands can be managed through productivity-linked incentives rather than across-the-board hikes.

Inflation’s uneven impact on sectors highlights the importance of tailored strategies rather than one-size-fits-all solutions. Recognizing these distinctions equips stakeholders with practical tools to navigate economic uncertainty more effectively.

Government Policies Addressing Inflation

Government policies play a critical role in managing inflation in Pakistan. When inflation runs high, it doesn’t just pinch the pockets of individuals but impacts the entire economic fabric, including investment, production, and overall growth. The government’s strategies can either ease inflationary pressures or sometimes unintentionally exacerbate them. Therefore, understanding these policies, especially monetary and fiscal tools, helps stakeholders like traders, brokers, and analysts gauge market trends and make informed decisions.

Monetary Policy Measures

Interest rate adjustments

Interest rates are the frontline tool used by the State Bank of Pakistan to control inflation. When inflation spikes, the central bank often raises the policy rate to discourage excessive borrowing and spending. Higher interest rates make loans more expensive for consumers and businesses, which can reduce demand and help cool down rising prices. For example, during past inflation surges, hikes in the policy rate have slowed down credit growth, helping to stabilize the economy. But significantly, if rates go too high, they risk stifling investment and growth—hence, balancing this instrument is tricky.

Liquidity management

Managing the money supply—or liquidity—in the economy is another key monetary tool. The central bank can inject or withdraw liquidity through mechanisms like open market operations or adjusting reserve requirements. Too much money chasing too few goods drives prices up, so controlling the amount of cash floating around is essential. In Pakistan, during inflationary periods, the SBP might mop up excess liquidity from banks to prevent overheating. Conversely, if the economy slows, they might push more funds into the system. Liquidity management directly impacts inflation but also affects currency stability and confidence.

Fiscal Actions and Subsidies

Taxation changes and support for vulnerable groups

Fiscal policy complements monetary measures by influencing demand through government spending and taxation. Adjusting taxes, especially indirect ones like sales tax or customs duties, can either cool or heat inflation. For instance, increasing sales taxes on non-essential goods can dampen demand and curb price rises. Moreover, targeted subsidies and cash support protect vulnerable groups who bear the brunt of inflation’s bite. Pakistan uses programs like the Ehsaas Emergency Cash assistance to help low-income households cope during inflation spikes. However, excessive subsidies can strain public finances and sometimes fuel inflation if not managed well.

Tackling inflation is a balancing act where monetary tightening must be harmonized with fiscal discipline. Government measures, both in terms of rates and direct financial support, shape Pakistan’s inflation trajectory and economic health.

Understanding these policy tools helps investors and market watchers anticipate economic shifts and align strategies accordingly, which is crucial in a volatile inflation environment.

Inflation's Impact on Social and Economic Inequality

Inflation does not affect everyone equally, and understanding its impact on social and economic inequality is key to grasping the bigger picture of Pakistan’s economy. When prices rise steadily, the effects tend to hit some groups harder than others. This section explores which segments of society bear the brunt and how inflation alters the distribution of wealth and income, often making existing inequalities worse.

Who Gets Affected the Most?

Low-income households and fixed-income groups are the most vulnerable during periods of inflation. These households spend a larger portion of their income on basic necessities such as food, fuel, and housing. When prices climb, their limited budgets get squeezed even tighter, leaving little room to adjust or save. For instance, consider a daily wage laborer in Karachi: if food prices jump by 10%, without any rise in earnings, their purchasing power drastically dwindles.

Pensioners and government employees drawing fixed salaries also face similar difficulties. Their incomes often don’t keep pace with inflation, eroding their real earnings. This mismatch means reduced living standards and a need to cut back on essentials like healthcare and education. Policymakers must note that without targeted support such as subsidies or inflation-indexed pensions, these groups risk falling deeper into poverty.

Role of Inflation in Widening Inequality

Inflation can widen the gap between the rich and the poor by disproportionately benefiting those with assets that appreciate in value, like property or stocks. Wealthier individuals often invest in commodities or financial assets that tend to increase in price alongside inflation, effectively safeguarding their wealth or even gaining from it. Meanwhile, those relying solely on wages or cash savings see their wealth diminish.

In Pakistan, the ownership of assets like real estate or shares is heavily skewed towards the richer segment of society. As inflation pushes up real estate prices, wealth grows for property owners but becomes unattainable for those without initial capital to invest. This dynamic creates a catch-22: lower-income families see housing costs spike beyond affordability, while wealthier groups benefit from asset appreciation.

Inflation's uneven effect on wealth distribution means that economic policies aiming to control inflation need to consider social equity to avoid reinforcing poverty and social divisions.

To counter this, measures such as affordable housing projects, inflation-adjusted wages, and progressive taxation can help. Understanding the link between inflation and inequality provides investors and analysts with a clearer picture of social stability risks, enabling more informed decision-making.

By recognizing who inflation impacts most deeply and how it shapes inequality, Pakistan can take more effective steps to support its vulnerable groups while ensuring that economic growth is inclusive and sustainable.

Long-Term Consequences of Persistent Inflation

Persistent inflation is more than just rising prices; it slowly reshapes the entire economic landscape of Pakistan. Understanding the long-term consequences is key for investors, policymakers, and consumers alike because it influences stability and growth for years on end. When inflation sticks around, it can erode the foundation of economic confidence, affect how businesses plan for the future, and change how households save or spend. This section breaks down those effects to give a clear picture of what’s at stake.

Economic Growth and Stability

Inflation that sticks around makes investors jittery. When prices climb steadily but unpredictably, businesses face difficulty forecasting costs and revenues, leading to less investment. For example, a manufacturer unsure about the future price of steel or labor might hold off on expanding production lines. This caution slows economic growth and can create bigger swings in economic stability.

In Pakistan, where capital markets are still developing, persistent inflation weighs heavily on investor confidence. Foreign investors particularly hesitate to put money in if they can’t expect stable returns, which limits the inflow of valuable foreign capital. Moreover, local entrepreneurs might divert funds to short-term uses rather than long-term projects, fearing inflation will wipe out future profits.

"When people can’t trust that their money will hold value, they become reluctant to invest in anything beyond the immediate short term."

This uncertainty also spills over to the financial sector, compelling the State Bank of Pakistan to keep interest rates high to curb inflation expectations. While this can temporarily stabilize prices, it often makes borrowing expensive, further slowing down economic activities.

Savings, Capital Formation, and Consumption Patterns

Persistent inflation changes the way both households and businesses handle their money. One clear effect is on savings. When inflation outpaces returns on savings accounts or fixed deposits—as has often happened in Pakistan—people feel the pinch and lose faith in saving through traditional means.

This discouragement reduces capital available for investment, a process called capital formation. Fewer investments in factories, equipment, and infrastructure mean slower economic progress. For example, if a family’s savings can’t keep up with inflation, they may choose to spend more quickly or switch to tangible goods like gold or real estate, which hold value better during inflationary periods.

Meanwhile, consumption patterns shift too. People tend to prioritize essential items and cut back on luxury purchases. Businesses respond by adjusting products, such as focusing on lower-cost alternatives or smaller packaging to match shrinking purchasing power. These changes ripple through the economy, affecting everything from retail sales to manufacturing decisions.

In a nutshell, persistent inflation nudges both consumers and firms to rethink how they manage money — leading to less saving, altered spending habits, and subdued investment, all of which slow down the broader economy over time.

Understanding these long-term consequences helps traders, investors, and policymakers make informed decisions. Watching inflation closely and adapting strategies accordingly can mean the difference between staying afloat or sinking in a shaky economic environment.

Coping Strategies for Individuals and Businesses

Inflation can hit hard, whether you're managing a household budget or running a business. Understanding how to cope with rising prices is key to maintaining financial health and operational stability. For Pakistani households and companies alike, adapting quickly to inflationary pressures means the difference between just surviving and thriving in tough economic times. This section focuses on practical ways to adjust spending, prioritize resources, and fine-tune business approaches to stay afloat when costs surge.

Household Budget Adjustments

Managing expenses in an inflationary environment requires conscious effort and smart prioritization. For many Pakistani families, the first step is tracking monthly spending closely to identify areas where costs have ballooned unnecessarily. For example, families might cut back on luxury items or non-essential utilities to keep the budget balanced.

One effective technique is grouping expenses into essentials—like food, rent, and utilities—and non-essentials—like dining out and entertainment. By focusing on essentials and finding cheaper local alternatives, such as switching from imported products to locally made brands, households can stretch their rupees further. Adjusting cooking habits to use ingredients that have not spiked in price can also help reduce food bills.

Setting a fixed monthly allowance for discretionary spending and sticking to it prevents overspending when prices climb. Also, using discounts and bulk buying commonly found in local markets can shield budgets from small but frequent price hikes.

A common strategy among families in Lahore is to replace costly nuts and imported cereals with seasonal local fruits and pulses, which provide good nutrition at a fraction of the cost.

Business Adaptation Techniques

Businesses in Pakistan face their own set of challenges in inflationary times, particularly when it comes to pricing and controlling costs. One effective strategy is revisiting pricing structures regularly to reflect input cost changes without scaring off customers. This may mean smaller incremental price increases rather than sporadic big jumps, which can hurt customer loyalty.

Cost control is another area where businesses can win or lose. Small manufacturers in Faisalabad, for instance, have started sourcing raw materials from closer suppliers to cut down transportation costs and avoid sudden price shocks. Another approach is improving operational efficiency by reducing waste and energy usage.

Additionally, many businesses benefit from negotiating longer-term contracts with suppliers at fixed rates to hedge against unexpected price rises. It's also wise to invest in staff training to boost productivity, helping maintain profit margins despite cost increases.

A Karachi-based garment producer reduced electricity expenses by installing energy-efficient lighting and machines, saving thousands of rupees monthly and easing pressure on product pricing.

In short, coping with inflation is about adapting spending and operational habits with agility. Both households and businesses in Pakistan need to stay alert and flexible, continually reassessing priorities and looking for practical, affordable ways to ease inflation’s pinch.

International Comparisons and Lessons for Pakistan

Looking at inflation in a wider context really helps us get a better grip on what Pakistan is going through. By comparing inflation trends and policy moves in similar countries, we get insights that can guide better economic decisions here. It’s not just about knowing numbers; it’s about understanding how different economic setups, government policies, and external factors shape inflation outcomes. For traders, investors, and analysts, these comparisons offer practical benchmarks and cautionary tales that could influence market moves or policy advice.

Inflation Trends in Similar Economies

When we talk about regional comparisons, countries like India, Bangladesh, and Turkey often pop up alongside Pakistan. These nations have similar economic structures, inflation challenges, and demographic pressures. For instance, India sees inflation spikes mainly due to food price volatility and fuel costs, much like Pakistan. Bangladesh, on the other hand, manages inflation through strong currency reserves and export-led growth, offering an alternative approach.

Understanding these trends helps Pakistan recognize patterns, such as the seasonal inflation spikes before harvests or international oil price shocks. It also underlines the role of external debt and currency stability. For example, Turkey faced double-digit inflation recently due to currency devaluation and policy missteps — a warning sign for Pakistan’s own currency management.

Watching inflation trends in neighboring countries helps anticipate risks and craft responses suited to Pakistan’s unique conditions.

Policy Approaches from Other Countries

Examining how other countries have tackled inflation gives valuable lessons. India’s Reserve Bank, for example, often shifts interest rates to keep inflation within a targeted range. They also use inflation targeting as a clear policy tool, which Pakistan’s State Bank is also moving towards. Fiscal discipline through curbed government borrowing together with targeted subsidies has helped some economies avoid runaway inflation.

On the flip side, Argentina’s experience shows what happens when inflation control is ignored — spiraling prices, loss of investor confidence, and hurtful wage-price spirals. Their repeated resort to price controls rather than addressing deeper monetary issues led to stagnant growth and social unrest.

For Pakistan, effective policy might involve combining monetary tightening with fiscal reforms and better-targeted social support. Looking at successful examples like South Korea’s disciplined approach or Malaysia’s gradual price adjustments can inform Pakistan’s strategy in controlling inflation without choking growth.

In short, international experiences provide a reality check. Successful interventions show the value of clear communication, credible policies, and flexible responses. Meanwhile, cautionary tales remind us that short-term quick fixes often lead to bigger problems down the line.

By weaving these international comparisons and lessons into its own policies, Pakistan can navigate inflation challenges with more confidence and fewer surprises.