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http://content.icicidirect.com/mailimages/ICICIdirect_Inflation_March2012.pdf
WPI......................................................................................................................6.95% YoY
Primary Articles ...................................................................................................6.28% YoY
Fuel ...................................................................................................................12.83% YoY
Manufacturing .....................................................................................................5.75% YoY
WPI – December 2011 revision ..................................... upwards to 7.74% from 7.47% YoY
Supply side constraints persist…
The Wholesale Price Index (WPI) rose to 6.95% in February 2012 from
6.55% in January 2012 led by increase in primary articles inflation.
Sequentially, WPI index rose 0.44%, in line with its last three months
average sequential rise. Trend of upward revision of provisional figures
continued as December 2011 inflation was revised upwards to 7.74%
from 7.47%.
Structural inflation in protein rich food items led to a food inflation rise
to 6.07% as against -0.52% in January 2012. Core inflation
(manufacturing ex-food) moderated sharply to 5.68% from 6.8% in
January 2012 indicating demand side price pressures cooling off.
Primary articles inflation structural in nature …
Primary articles inflation rose to 6.28% from 2.25% reported in January
2012. The sequential decline in vegetable price has stopped while protein
rich items (milk, meat and fish) continued to rise albeit at a slower pace.
Decline in price of fibres dragged non-food articles inflation in the
negative zone to -2.5% YoY. However, sequentially the 2% decline in
cotton prices was offset by an 8% increase in price of jute. Hence, non
food inflation rose 2.13% MoM. Mineral inflation continues to stay at
elevated levels of 25.28% YoY and 1.5% MoM.
Primary articles inflation is more structural in nature. Unless supply side
constraints are addressed, primary articles inflation may continue to rise.
Fuel group inflation suppressed…
Fuel inflation moderated to 12.83% from 14.21% reported in January
2012 & 14.98% in December 2011. Brent crude price was down to
$110/barrel in December & is now trading at $123/barrel. Decontrolled fuel
prices will follow the increase in global crude oil price. With hardening of
crude oil prices and mounting pressure on government to reduce its fuel
subsidy burden to curtail fiscal deficit, revision in administered fuel price
is inevitable. This may lead to a pick-up in fuel inflation.
Core inflation moderates as sluggish demand, high base effect creeps in…
Manufactured goods inflation has come down to 5.75%, it’s lowest since
February 2011. Manufacturing ex-food (core inflation) also moderated
sharply to 5.68% as compared to 6.68% in January 2012 and 7.99% in
December 2011. Abating demand side price pressures, high base effect
(core inflation: 7.68% February 2011) and some appreciation in the rupee
in the last two months has led to the sharp decline. Going forward, pass
through of increased freight and fuel cost, likely increase in taxes on
manufactured products (likely to be announced in the Central budget
2012-13) may off set the reduced demand side price pressures.
Analysis: Though inflation has moderated, upside risk persists as input
price pressure still remains. The RBI in its third quarter macroeconomic
review has expressed its concerns on the growing fiscal deficit. Tight
liquidity led to a CRR cut, which can also have an inflationary impact later.
We, therefore, hold our view that the RBI may not cut rates in today’s
policy meet and the first repo rate cut may come in the Annual Monetary
Policy during April 2012.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_Inflation_March2012.pdf
WPI......................................................................................................................6.95% YoY
Primary Articles ...................................................................................................6.28% YoY
Fuel ...................................................................................................................12.83% YoY
Manufacturing .....................................................................................................5.75% YoY
WPI – December 2011 revision ..................................... upwards to 7.74% from 7.47% YoY
Supply side constraints persist…
The Wholesale Price Index (WPI) rose to 6.95% in February 2012 from
6.55% in January 2012 led by increase in primary articles inflation.
Sequentially, WPI index rose 0.44%, in line with its last three months
average sequential rise. Trend of upward revision of provisional figures
continued as December 2011 inflation was revised upwards to 7.74%
from 7.47%.
Structural inflation in protein rich food items led to a food inflation rise
to 6.07% as against -0.52% in January 2012. Core inflation
(manufacturing ex-food) moderated sharply to 5.68% from 6.8% in
January 2012 indicating demand side price pressures cooling off.
Primary articles inflation structural in nature …
Primary articles inflation rose to 6.28% from 2.25% reported in January
2012. The sequential decline in vegetable price has stopped while protein
rich items (milk, meat and fish) continued to rise albeit at a slower pace.
Decline in price of fibres dragged non-food articles inflation in the
negative zone to -2.5% YoY. However, sequentially the 2% decline in
cotton prices was offset by an 8% increase in price of jute. Hence, non
food inflation rose 2.13% MoM. Mineral inflation continues to stay at
elevated levels of 25.28% YoY and 1.5% MoM.
Primary articles inflation is more structural in nature. Unless supply side
constraints are addressed, primary articles inflation may continue to rise.
Fuel group inflation suppressed…
Fuel inflation moderated to 12.83% from 14.21% reported in January
2012 & 14.98% in December 2011. Brent crude price was down to
$110/barrel in December & is now trading at $123/barrel. Decontrolled fuel
prices will follow the increase in global crude oil price. With hardening of
crude oil prices and mounting pressure on government to reduce its fuel
subsidy burden to curtail fiscal deficit, revision in administered fuel price
is inevitable. This may lead to a pick-up in fuel inflation.
Core inflation moderates as sluggish demand, high base effect creeps in…
Manufactured goods inflation has come down to 5.75%, it’s lowest since
February 2011. Manufacturing ex-food (core inflation) also moderated
sharply to 5.68% as compared to 6.68% in January 2012 and 7.99% in
December 2011. Abating demand side price pressures, high base effect
(core inflation: 7.68% February 2011) and some appreciation in the rupee
in the last two months has led to the sharp decline. Going forward, pass
through of increased freight and fuel cost, likely increase in taxes on
manufactured products (likely to be announced in the Central budget
2012-13) may off set the reduced demand side price pressures.
Analysis: Though inflation has moderated, upside risk persists as input
price pressure still remains. The RBI in its third quarter macroeconomic
review has expressed its concerns on the growing fiscal deficit. Tight
liquidity led to a CRR cut, which can also have an inflationary impact later.
We, therefore, hold our view that the RBI may not cut rates in today’s
policy meet and the first repo rate cut may come in the Annual Monetary
Policy during April 2012.
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