Higher Food Inflation Takes August WPI to 6.1%
DSIJ Intelligence / 16 Sep 2013
The August WPI which has risen to 6.1% is clearly a big disappointment for the market which were touching a 20K mark today. The higher food article inflation has acted as a spoiler.
August WPI came in at 6.1% which is above the market expectations as well a trend seen in the last few months. July inflation was at 5.79% hence on month on month basis too there is a rising trend.
The market was expecting inflation to remain near the 5.8% mark, but the higher inflation has once again caused a panic in the markets as the economy’s trend has reversed from declining inflation to rising inflation. This nevertheless does not give any robust picture of the economy as it will become very difficult for the RBI to cut the rates and even harden them further due to the slower growth in the economy.
Following the disappointing numbers domestic markets closed the day with flat gains, wiping out all the gains that were seen in the early hours.
Food inflation which remains a major concern for all has doubled to 18% against 9% a year ago. In July 2013 Food inflation was at 11.91% which clearly indicate that even on month on month basis, the food inflation has risen sharply. Rice, Vegetables, Egg, meat and fish inflation numbers have also remained elevated. The onion inflation has rose to 244% and remains the highest in the overall WPI data.
Primary article inflation has increased to 11.72% against 11.23% a year ago. In July this year, Primary article inflation was at 8.99%.
Power and fuel inflation is at 11.34% against 11.31% in July but on year on year basis, fuel and power prices have rose sharply due to serial hikes in the diesel and petrol prices.
Prices of the Manufactured Products have rose by 1.9% against 2.81% in July 2013 and 6.36% a year ago period. This is largely due to the slowdown in the industries which has led to a poor demand of many products. WPI data also indicates a fall in the iron and metal prices. All the constituents in the manufactured articles have shown a slowest growth except for the sugar prices which have rose by more than 7%.
The higher numbers means most probably RBI will not go for a rate cut. The new governor however may surprise the markets.
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