A SLIGHT RELIEF
Inflation for the month of July fell more than expected to 6.87% y-o-y in July from 7.25% in June (Consensus: 7.2%). The relief was primarily led by a much lower-than-expected increase in primary inflation (mainly food and minerals prices) even as core inflation jumped sharply.
CORE INFLATION STILL HIGH
Core inflation (WPI manufactured ex-food) rose to 5.4% y-o-y in July from 4.8% in June. Key hit came from higher global commodity prices and the lagged effect of INR depreciation. Meanwhile, food inflation fell more than expectations and eased to 8.7% y-o-y from 9.0% as prices of vegetables contracted. Excluding volatile vegetable prices, food prices in India continued to rise.
IS THIS AN ABERRATION ?
The current primary (food and non-food) inflation numbers do not yet seem to reflect ground reality, and according to most economists the July reading may get revised up as we start to factor in a deficit monsoon. Supply shocks led by a deficit monsoon and higher global food prices may push primary (food and non-food) inflation higher in the coming months. This, along with an impending fuel price hike and a delayed adjustment to electricity prices, suggests that the July month reading is unlikely the start of a trend.
Most economists still have kept the full year WPI estimates unchanged between 7.5-8%
Inflation for the month of July fell more than expected to 6.87% y-o-y in July from 7.25% in June (Consensus: 7.2%). The relief was primarily led by a much lower-than-expected increase in primary inflation (mainly food and minerals prices) even as core inflation jumped sharply.
CORE INFLATION STILL HIGH
Core inflation (WPI manufactured ex-food) rose to 5.4% y-o-y in July from 4.8% in June. Key hit came from higher global commodity prices and the lagged effect of INR depreciation. Meanwhile, food inflation fell more than expectations and eased to 8.7% y-o-y from 9.0% as prices of vegetables contracted. Excluding volatile vegetable prices, food prices in India continued to rise.
IS THIS AN ABERRATION ?
The current primary (food and non-food) inflation numbers do not yet seem to reflect ground reality, and according to most economists the July reading may get revised up as we start to factor in a deficit monsoon. Supply shocks led by a deficit monsoon and higher global food prices may push primary (food and non-food) inflation higher in the coming months. This, along with an impending fuel price hike and a delayed adjustment to electricity prices, suggests that the July month reading is unlikely the start of a trend.
Most economists still have kept the full year WPI estimates unchanged between 7.5-8%
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