Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
August’s headline yoy WPI of 9.8% was slightly ahead of Bloomberg consensus expectations
of 9.6% but seasonally adj. core mfg. inflation of 5.5% came in close to the RBI’s comfort
zone.
August headline yoy WPI of 9.8% vs. Bloomberg consensus of 9.6%
As expected, yoy WPI inflation climbed from the 9.2% reading for July.
Looking at the details, yoy total food inflation rose to 9.1% from 8.0% in July as primary
food inflation increased to 9.6% from 8.2% and manufactured food products inflation
increased to 8.0% from 7.6%.
Yoy fuel and power inflation increased to 12.8% in August from 12.0% in July.
Yoy core manufacturing inflation inched up to 7.7% in August from 7.5% in July.
Seasonally adj. core manufacturing inflation within RBI’s comfort zone
The core manufacturing price index increased 40 basis points from July.
On a seasonally adjusted basis, the core manufacturing price index increased 46 basis
points from July, which suggests an annualized rate of only 5.5%, in line with the RBI’s
comfort range and significantly below the current yoy rate of 7.7%.
As the following chart comparing seasonally adjusted and yoy core manufacturing
inflation shows, we think core manufacturing inflation peaked on a seasonally adjusted
basis earlier this year (March)
June WPI revised up by 7 bp, a much lower revision than past months
June yoy headline WPI inflation was revised up slightly (7 bp) to 9.5% from 9.4%, a much
lower revision than we have seen in some of the past months. By comparison, the upward
revision for April was almost 1ppt to 9.7% from 8.7%, while the upward revision for May was
c50 bp to 9.6% from 9.1%.
However, the composition of the June revision was a slight negative, as the upward revision
was linked to an upward revision of c50 bp in the core manufacturing inflation number to 7.7%
from 7.2% partially offset by downward revisions to food and minerals inflation.
That said, even with the upward revision, seasonally adjusted core manufacturing inflation
was only 5.0% in June, leading credence to our thesis that core manufacturing inflation
pressures peaked on a seasonally adjusted basis in March at c15%.
Yoy inflation may have peaked in August; inflation undershoot by December?
We think the yoy headline WPI inflation could start to trend down from September (albeit
modestly to c9.6%) and decline below 8% by December as core manufacturing inflation
pressures moderate and yoy food inflation benefits from a high base effect in December 2010
when yoy food inflation jumped to 9.9% from 6.8% in November.
As the following chart looking at projected headline yoy WPI inflation shows, we also think
(refer “We see absolute and relative value” dated 12 September 2011 for details, pp 6) that
the inflation trajectory could undershoot versus RBI and consensus expectations if seasonally
adjusted core inflation stays close to July/August levels of about 4-5%. Specifically, headline
yoy WPI inflation would be only c6% in March 2012 under this scenario, versus the RBI
expectation of 7%. Our base case assumes a higher trajectory for seasonally adjusted core
inflation, and yields results close to the RBI forecast. The upside risk would come from higherthan-expected food prices.
Expecting another 25 bp of policy rate hike on 16 September
We think that RBI could raise policy rates by 25 basis points at its mid quarter policy review
on 16 September, and signal a change in the monetary policy stance (i.e., pause) in the
quarterly policy review on 25 October.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
August’s headline yoy WPI of 9.8% was slightly ahead of Bloomberg consensus expectations
of 9.6% but seasonally adj. core mfg. inflation of 5.5% came in close to the RBI’s comfort
zone.
August headline yoy WPI of 9.8% vs. Bloomberg consensus of 9.6%
As expected, yoy WPI inflation climbed from the 9.2% reading for July.
Looking at the details, yoy total food inflation rose to 9.1% from 8.0% in July as primary
food inflation increased to 9.6% from 8.2% and manufactured food products inflation
increased to 8.0% from 7.6%.
Yoy fuel and power inflation increased to 12.8% in August from 12.0% in July.
Yoy core manufacturing inflation inched up to 7.7% in August from 7.5% in July.
Seasonally adj. core manufacturing inflation within RBI’s comfort zone
The core manufacturing price index increased 40 basis points from July.
On a seasonally adjusted basis, the core manufacturing price index increased 46 basis
points from July, which suggests an annualized rate of only 5.5%, in line with the RBI’s
comfort range and significantly below the current yoy rate of 7.7%.
As the following chart comparing seasonally adjusted and yoy core manufacturing
inflation shows, we think core manufacturing inflation peaked on a seasonally adjusted
basis earlier this year (March)
June WPI revised up by 7 bp, a much lower revision than past months
June yoy headline WPI inflation was revised up slightly (7 bp) to 9.5% from 9.4%, a much
lower revision than we have seen in some of the past months. By comparison, the upward
revision for April was almost 1ppt to 9.7% from 8.7%, while the upward revision for May was
c50 bp to 9.6% from 9.1%.
However, the composition of the June revision was a slight negative, as the upward revision
was linked to an upward revision of c50 bp in the core manufacturing inflation number to 7.7%
from 7.2% partially offset by downward revisions to food and minerals inflation.
That said, even with the upward revision, seasonally adjusted core manufacturing inflation
was only 5.0% in June, leading credence to our thesis that core manufacturing inflation
pressures peaked on a seasonally adjusted basis in March at c15%.
Yoy inflation may have peaked in August; inflation undershoot by December?
We think the yoy headline WPI inflation could start to trend down from September (albeit
modestly to c9.6%) and decline below 8% by December as core manufacturing inflation
pressures moderate and yoy food inflation benefits from a high base effect in December 2010
when yoy food inflation jumped to 9.9% from 6.8% in November.
As the following chart looking at projected headline yoy WPI inflation shows, we also think
(refer “We see absolute and relative value” dated 12 September 2011 for details, pp 6) that
the inflation trajectory could undershoot versus RBI and consensus expectations if seasonally
adjusted core inflation stays close to July/August levels of about 4-5%. Specifically, headline
yoy WPI inflation would be only c6% in March 2012 under this scenario, versus the RBI
expectation of 7%. Our base case assumes a higher trajectory for seasonally adjusted core
inflation, and yields results close to the RBI forecast. The upside risk would come from higherthan-expected food prices.
Expecting another 25 bp of policy rate hike on 16 September
We think that RBI could raise policy rates by 25 basis points at its mid quarter policy review
on 16 September, and signal a change in the monetary policy stance (i.e., pause) in the
quarterly policy review on 25 October.
No comments:
Post a Comment