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WPI inflation rises to 9.06% in April
Wholesale price-based inflation index for the month of May, 2011 rose to 9.06% from
8.66% for April, 2011. The headline inflation number was well above the median (8.74%)
of Bloomberg’s survey of economists. Core (non-food manufacturing) inflation jumped up
to 7.3% from 6.3% in April 2011. Inflation for the month of March 2011 was revised
upwards from 9.04% to 9.68%, leading to an increase in the average inflation for FY2011
to 9.6%.
On the positive side, both primary articles and fuel & power inflation eased off during May
2011 as compared to April 2011. Primary articles inflation continued moderating for the
fourth-straight month, indicating the trend that most of the raw material cost pressures
have abated considerably over the last few months. In spite of a steep (`5/liter) hike in
petrol prices in May 2011, fuel and power inflation moderated to 12.3% yoy (13.3% yoy in
April 2011). Even on a month-on-month annualized basis, fuel inflation was considerably
lower at 3.8%.Electricity inflation surprisingly showed a negative tick for the first time since
July 2009.
On the flip side, manufactured products which have a weightage of ~65% in the overall
WPI inflation, rose at fastest pace since October, 2008. Manufacturing articles inflation
was driven by chemicals (7.1%), metals (7.9%) and textile products (15.9%). The primary
and manufactured articles inflation spread narrowed further to 4.0% from as high as
13.1% in January 2011 indicating greater pass-through of higher raw material costs and
commodity prices to consumers.
The Reserve Bank of India expects the headline inflation to stay in the range of 9% during
the 1HFY2012 and ease off thereafter to c.6% by end of FY2012. Taking into account the
silver linings emerging from the data under new IIP series coupled with continued
inflationary pressures, we expect the central bank to continue with its tight monetary stance
for a while longer. However, we expect the policy rates to peak at lower levels in the this
cycle compared to the previous one, as inadequate forex inflows are likely to contribute to
a weaker demand than in the previous cycle. Also the high frequency indicators such as
PMI are also showing initial signs of cooling down, which are expected to contain the
inflationary pressures faster than expected.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
WPI inflation rises to 9.06% in April
Wholesale price-based inflation index for the month of May, 2011 rose to 9.06% from
8.66% for April, 2011. The headline inflation number was well above the median (8.74%)
of Bloomberg’s survey of economists. Core (non-food manufacturing) inflation jumped up
to 7.3% from 6.3% in April 2011. Inflation for the month of March 2011 was revised
upwards from 9.04% to 9.68%, leading to an increase in the average inflation for FY2011
to 9.6%.
On the positive side, both primary articles and fuel & power inflation eased off during May
2011 as compared to April 2011. Primary articles inflation continued moderating for the
fourth-straight month, indicating the trend that most of the raw material cost pressures
have abated considerably over the last few months. In spite of a steep (`5/liter) hike in
petrol prices in May 2011, fuel and power inflation moderated to 12.3% yoy (13.3% yoy in
April 2011). Even on a month-on-month annualized basis, fuel inflation was considerably
lower at 3.8%.Electricity inflation surprisingly showed a negative tick for the first time since
July 2009.
On the flip side, manufactured products which have a weightage of ~65% in the overall
WPI inflation, rose at fastest pace since October, 2008. Manufacturing articles inflation
was driven by chemicals (7.1%), metals (7.9%) and textile products (15.9%). The primary
and manufactured articles inflation spread narrowed further to 4.0% from as high as
13.1% in January 2011 indicating greater pass-through of higher raw material costs and
commodity prices to consumers.
The Reserve Bank of India expects the headline inflation to stay in the range of 9% during
the 1HFY2012 and ease off thereafter to c.6% by end of FY2012. Taking into account the
silver linings emerging from the data under new IIP series coupled with continued
inflationary pressures, we expect the central bank to continue with its tight monetary stance
for a while longer. However, we expect the policy rates to peak at lower levels in the this
cycle compared to the previous one, as inadequate forex inflows are likely to contribute to
a weaker demand than in the previous cycle. Also the high frequency indicators such as
PMI are also showing initial signs of cooling down, which are expected to contain the
inflationary pressures faster than expected.
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