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Inflation Update
Wholesale Price Index Inflation | |
The good news was that the WPI inflation for July moved below 10% after staying in double digit for last five months, much lower than the market and our own estimation.
India's WPI for July, 2010 rose by 9.97% yoy (1.04% m/m increase) vs 10.55% in June, lower than market expectation of 10.4% (last year same month: -0.54%).
But the bad news was that May WPI inflation was revised up to 11.14% vs 10.16% announced earlier, a revision of about 100 bps. Inflation has been above 11% for three months.
Bottomline:
- Within Food articles, only fruits and vegetables showed a decline. Milk, poultry, mutton, eggs, fish all moved up. Food prices are expected to come down on better monsoon in next couple of months. But the decline will not be as sharp as expected on various structural reasons like high minimum support price of crops (MSP), higher cost of intermediation, higher income, food stock mismanagement, change in dietary habits etc. On annual basis, the base turns favourable for food articles as prices had moved up last year on severe drought.
- Jump in non-food articles (like raw rubber, raw silk, oil seeds) and mineral prices (like iron ore) will have an adverse impact on manufactured products as this will push up input cost. Rise in iron ore prices will now cause steel prices to move up as already seen in Aug.
- Fuel component of WPI Inflation moved up due to the price hike on administered fuel products including deregulation of Petrol prices on June 25th. But oil prices have recently moved down on disappointing global economic data that should get reflected in our Fuel index.
- It was a good sign that Manufactured products declined (that RBI tracks closely). But it is too early to say that inflation is conquered. Global commodity prices are softening on uncertain outlook that is positive for India. But domestic demand and capacity constraint still remains a worry.
- Considering the trend of past revision of inflation data, we will not be surprised if July inflation gets revised to move above 10%. This will keep the average inflation for FY11 to be around 8%.
- We still expect RBI to raise Repo Rate by 25 bps and Reverse Reo rate by 25-50 bps in Sept unless July IIP number disappoints significantly. But after that RBI might like to pause for a while as inflation is expected to trend lower.
Trend in Monthly WPI Inflation (% yoy)
Final and Provisional WPI numbers
What impacted inflation, the details:
PRIMARY ARTICLES (Weight 22.02%)
The index for this group rose 1.9% m/m (14.94% yoy).
- The index for 'Food Articles' group rose by 0.9% m/m due to higher prices of maize and poultry chicken (5% m/m), condiments & spices (4% m/m), mutton (3% m/m), urad, gram, milk, eggs, fish-inland, jowar and wheat (2% m/m) and bajra and rice (1% m/m).
- The index for 'Non-Food Articles' group rose by 0.8% m/m due to higher prices of raw rubber (7% m/m), castor seed (5% m/m), raw silk and fodder (4% m/m), groundnut seed, raw jute, copra and sunflower and rape & mustard seed, gingelly seed and tobacco.
- The index for 'Minerals' group rose by 19.2% m/m due to higher prices of iron ore (25% m/m), magnesite (6% m/m), steatite and fluorite (3% m/m) and asbestos (1% m/m).
FUEL, POWER, LIGHT & LUBRICANTS (Weight 14.23%)
- The index for this group rose by 3.2% m/m due to higher prices of kerosene (24% m/m), liquefied petroleum gas (8% m/m), petrol (6% m/m), high speed diesel oil (4% m/m) and aviation turbine fuel (3% m/m).
MANUFACTURED PRODUCTS (Weight 63.75%)
The index for this group declined by 0.1% m/m (6.15% yoy).
- The index for 'Food Products' group declined by 0.6% m/m due to lower prices of bran (all kinds) (6%), sugar and butter (3% each), khandsari (2%) and coffee powder and gur (1% each).
- The index for 'Textiles' group declined by 0.4% m/m and that of 'Paper & Paper Products' group declined by 0.4% m/m.
- The index for 'Non-Metallic Mineral Products' group declined by 1.6% m/m due to lower prices of cement (2% m/m).
- The index for 'Basic Metals Alloys & Metal Products' group declined by 0.2% m/m.
- The index for 'Beverages Tobacco & Tobacco Products' group rose by 0.1% m/m.
- The index for 'Rubber & Plastic Products' group rose by 0.1% m/m and the index for 'Chemicals & Chemical Products' group rose by 0.4% m/m.
- The index for 'Machinery & Machine Tools' group rose by 0.5% m/m and that of 'Transport Equipment & Parts' group rose by 0.2% m/m.
Year-over-Year change
|
July 2010 |
June 2010 |
May 2010 |
April 2010 |
March 2010 |
| YoY% |
| All Commodities |
9.97% |
10.55% |
11.14% |
11.23% |
11.04% |
| Primary Articles |
14.94% |
16.28% |
18.47% |
17.06% |
18.25% |
| Food Articles |
10.29% |
14.60% |
17.00% |
16.71% |
17.39% |
| Non-food Articles |
21.05% |
18.59% |
18.39% |
21.84% |
24.69% |
| Minerals |
52.69% |
28.50% |
37.16% |
-0.07% |
1.29% |
| Fuel, Power, Light |
14.29% |
14.32% |
14.37% |
12.89% |
12.71% |
| Coal Mining |
13.46% |
13.46% |
13.46% |
13.46% |
13.46% |
| Mineral Oils |
15.99% |
16.17% |
16.21% |
17.27% |
17.05% |
| Electricity |
11.18% |
11.18% |
11.18% |
0.00% |
4.72% |
| Manufactured Products |
6.15% |
6.66% |
6.90% |
8.18% |
7.38% |
| Food Products |
4.12% |
4.31% |
4.72% |
8.42% |
15.48% |
| Non-food Manufactured |
6.67% |
7.29% |
7.42% |
8.09% |
5.39% |
| Beverage & Tobacco |
6.54% |
7.50% |
7.92% |
6.28% |
6.00% |
| Textiles |
13.77% |
14.74% |
15.75% |
15.64% |
13.73% |
| Wood |
14.65% |
14.65% |
14.65% |
14.65% |
9.63% |
| Paper |
1.37% |
1.51% |
0.98% |
1.23% |
0.39% |
| Leather |
0.24% |
0.48% |
0.48% |
-1.08% |
-1.62% |
| Rubber & Plastic |
6.98% |
6.67% |
6.23% |
4.88% |
4.54% |
| Chemicals |
4.89% |
5.83% |
4.83% |
7.85% |
8.00% |
| Non-Metallic Min. Prdt |
-4.81% |
-1.22% |
1.45% |
4.40% |
2.01% |
| Basic Metals, Alloys |
11.94% |
12.08% |
12.48% |
12.24% |
2.42% |
| Machinery & Tools |
4.24% |
3.90% |
4.24% |
3.84% |
3.19% |
| Transport Equip./Parts |
2.27% |
2.40% |
2.80% |
2.46% |
0.74% | |
Month-on-month percentage changes
|
July 2010 |
June 2010 |
May 2010 |
April 2010 |
March 2010 |
| Month-on-Month% |
| All Commodities |
1.04% |
-0.23% |
1.13% |
1.62% |
1.16% |
| Primary Articles |
1.85% |
-0.85% |
2.32% |
1.47% |
2.69% |
| Food Articles |
0.91% |
-0.24% |
1.34% |
2.03% |
-0.24% |
| Non-food Articles |
0.80% |
1.34% |
0.11% |
0.36% |
10.05% |
| Minerals |
19.25% |
-16.35% |
28.02% |
-1.33% |
8.71% |
| Fuel, Power, Light |
3.21% |
0.51% |
2.03% |
0.91% |
1.34% |
| Coal Mining |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
| Mineral Oils |
5.38% |
0.86% |
0.33% |
1.51% |
2.24% |
| Electricity |
0.00% |
0.00% |
11.18% |
-4.51% |
0.00% |
| Manufactured Products |
-0.14% |
-0.27% |
0.23% |
1.95% |
0.42% |
| Food Products |
-0.61% |
0.00% |
-1.25% |
-2.52% |
-1.97% |
| Beverage & Tobacco |
0.06% |
-0.03% |
1.28% |
0.44% |
2.53% |
| Textiles |
-0.37% |
0.18% |
0.74% |
2.33% |
2.45% |
| Wood |
0.00% |
0.00% |
0.00% |
6.82% |
7.32% |
| Paper |
-0.38% |
0.39% |
0.24% |
0.88% |
-0.10% |
| Leather |
-0.24% |
0.00% |
1.58% |
0.00% |
0.00% |
| Rubber & Plastic |
0.06% |
-0.06% |
2.67% |
0.57% |
0.40% |
| Chemicals |
0.38% |
-0.50% |
1.30% |
2.28% |
0.43% |
| Non-Metallic Min. Prdt |
-1.55% |
-2.06% |
-2.74% |
3.28% |
3.39% |
| Basic Metals, Alloys |
-0.24% |
-0.31% |
0.17% |
8.99% |
1.19% |
| Machinery & Tools |
0.50% |
-0.39% |
0.50% |
0.28% |
0.40% |
| Transport Equip./Parts |
0.22% |
-0.28% |
0.33% |
1.53% |
0.45% |
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