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WPI inflation remains elevated at 9.73% in October 2011
Wholesale price-based inflation (WPI) for October 2011 remained elevated at
9.73%, staying flat sequentially and marginally (8bp) higher than the median
forecast of Bloomberg’s survey of economists. Core (non-food manufacturing)
inflation – which the RBI tracks closely – also remained flat on mom basis at 7.5%.
Primary articles inflation came in at 11.4%, ~40bp lower than 11.8% witnessed in
September 2011. Food articles inflation accelerated well into the double digits at
11.1% as compared to 9.2% registered in September 2011. Non-food articles
inflation almost halved on mom basis to just 7.7% (14.8% in September 2011) on
account of lower prices of safflower, castor seed, soyabean and flowers amongst
others. Non-food articles inflation dropped into single digits for the first time since
November 2009. Inflation for minerals though continued to be high (at 20.4%)
also moderated from 24.8% witnessed in September 2011. Fuel and power
inflation continued to rise at a faster pace for the third straight month and rose to
the highest level in three years at 14.8%.
Manufactured products, which have a weightage of ~65% in overall WPI inflation,
continued to be high but remained steady on mom basis at 7.7% (average of 5.7%
over the past two years). Manufacturing articles inflation was driven by higher
prices of chemicals, metals and food products. On the other hand, inflation in
textile and rubber products moderated vis-à-vis September 2011. The spread
between primary articles and manufactured products inflation, which was as high
as 13.1% at the start of CY2011, reduced further to 3.7% (from 3.7% in September
2011).
Inflation figures came largely in-line with street’s consensus and, thus, had already
been factored in by the markets. Headline inflation figures remained elevated on
the back of pick-up in fuel and power inflation. Weak demand prospects on
account of slower global growth expectation have led to a bit of cooling off in
global commodity prices over the past few months. On the basis of this trend, we
expect headline inflation to moderate to 8-9% over the next few months. Hence, on
the basis of our expectation of moderation in inflation and considerable slowdown
in the domestic growth cycle, we do not expect further hike in policy rates in the
current interest rate cycle.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
WPI inflation remains elevated at 9.73% in October 2011
Wholesale price-based inflation (WPI) for October 2011 remained elevated at
9.73%, staying flat sequentially and marginally (8bp) higher than the median
forecast of Bloomberg’s survey of economists. Core (non-food manufacturing)
inflation – which the RBI tracks closely – also remained flat on mom basis at 7.5%.
Primary articles inflation came in at 11.4%, ~40bp lower than 11.8% witnessed in
September 2011. Food articles inflation accelerated well into the double digits at
11.1% as compared to 9.2% registered in September 2011. Non-food articles
inflation almost halved on mom basis to just 7.7% (14.8% in September 2011) on
account of lower prices of safflower, castor seed, soyabean and flowers amongst
others. Non-food articles inflation dropped into single digits for the first time since
November 2009. Inflation for minerals though continued to be high (at 20.4%)
also moderated from 24.8% witnessed in September 2011. Fuel and power
inflation continued to rise at a faster pace for the third straight month and rose to
the highest level in three years at 14.8%.
Manufactured products, which have a weightage of ~65% in overall WPI inflation,
continued to be high but remained steady on mom basis at 7.7% (average of 5.7%
over the past two years). Manufacturing articles inflation was driven by higher
prices of chemicals, metals and food products. On the other hand, inflation in
textile and rubber products moderated vis-à-vis September 2011. The spread
between primary articles and manufactured products inflation, which was as high
as 13.1% at the start of CY2011, reduced further to 3.7% (from 3.7% in September
2011).
Inflation figures came largely in-line with street’s consensus and, thus, had already
been factored in by the markets. Headline inflation figures remained elevated on
the back of pick-up in fuel and power inflation. Weak demand prospects on
account of slower global growth expectation have led to a bit of cooling off in
global commodity prices over the past few months. On the basis of this trend, we
expect headline inflation to moderate to 8-9% over the next few months. Hence, on
the basis of our expectation of moderation in inflation and considerable slowdown
in the domestic growth cycle, we do not expect further hike in policy rates in the
current interest rate cycle.
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