headline inflation rises in line with expectations -~8.4% Y-o-Y for December: Edelweiss

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Inflation came in at ~8.4% Y-o-Y for December, in line with consensus expectations and higher than 7.5% in November. Food articles inflation accelerated the most, growing at 13.5% against 9.4% in the previous month on back of high vegetable prices. Non-food articles inflation remained sticky on account of high cotton and jute prices, but is expecetd to taper off in Q4FY11 once effects of favorable base sets in. Overall, we maintain our inflation projection of 6.5% by March 2011, although upside risks have increased because of twin headwinds of rising global commodity prices and increasing food inflation.

n  Headline inflation comes in line with expectations

WPI inflation stood at 8.43% Y-o-Y for December, in line with consensus and Edelweiss estimates (~8.4%). Inflation for November was at 7.48%. The jump was along expected lines and was driven to a large extent by rising primary articles’ inflation, especially vegetables (up ~25% in December from -4.6% in November Y-o-Y). Non-food manufacturing inflation seems to be stabilising (~5.4% in December versus ~5.3% in November Y-o-Y). Importantly, sequential inflation data, M-o-M (3MMA), has been on an uptrend over the past four-five months. Meanwhile, inflation for October, was revised from 8.58% to 9.12%. 

n  Food articles, led by vegetables, spoil the show

Headline inflation jump was led by food inflation, which rose to 13.6% in December from 9.4% in November Y-o-Y. Food inflation has galloped primarily on account of increase in prices of vegetables, fruits, and spices. Vegetable and fruit prices have risen sharply due to untimely rains in some parts of the country and speculative hoarding in expectation of rise in prices. Due to a host of measures taken by government such as selling subsidised vegetables, vegetable prices are expected to correct to relatively lower levels in the next couple of months.  Apart from this, structural rise in demand of certain protein-rich food items— milk, meat, and fish—due to changing consumption patterns is also contributing to the stickiness in inflation.