ICICI Sec update on Infaltion

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Inflation moderates at more rapid pace…
Key readings…
ƒ CPI September 2014 eased to 6.45% (lowest since its release) coming in
lower than market expectations of 7.2% (Reuters survey)
ƒ The September 2014 CPI food inflation (CFPI) softened to 7.7% from
9.4%. Core CPI was down to 5.9% from 7.4% in July
ƒ WPI eased to 2.4% as inflation moderated across components on a
favourable base and a drop in global commodity prices
ƒ CPI for August did not see any revision while July WPI was revised up 22
bps to 5.41% from 5.19%
CPI: Food and fuel drag CPI lower
ƒ CPI September 2014 eased to 6.45% as all major components – food
inflation eased to 7.7% from 9.40%, fuel & light inflation softened to
3.5% from 4% and core CPI also eased sharply to 5.9% from 6.9%
reported in the previous month
ƒ Food prices on an MoM basis, started the seasonal decline with a drop
of 1.5% seen in September 2014. Retail price of most vegetables (onion,
potato and tomato) have declined by | 2-5 per kg. Even prices of fruits
have come off their peaks. Prices of egg, meat and fish also declined
0.71% MoM. Seasonal decline and a high base (11.7% YoY and 1.3%
MoM inflation September 2013) have led to September 2014 food
inflation easing to 7.68%, a drop of 172 bps from the previous reading
ƒ Fuel & light inflation and transport inflation (YoY) eased 60 bps and 220
bps on the back of a decline in global crude oil price leading to a decline
in domestic fuel cost
ƒ Core CPI also eased sharply by ~100 bps dragged by softening transport
and household inflation
ƒ CPI urban and rural August 2014 also moderated to 7.04% and 8.35%,
respectively
WPI
ƒ WPI September 2014 softened to 2.38% from 3.74% in August 2014
benefited by a high base and also due to an MoM drop in commodity
prices. Primary articles inflation eased to 2.18% from 3.89%, fuel
inflation eased to 1.33% from 4.54% while core inflation eased to 2.8%
from 3.45% in September 2014
ƒ Vegetable inflation was as high as 91% in the same month last year. This
high base led to a 15% drop in September 2014 YoY inflation.
Seasonally, the price of most staples like onion, potato, etc. have either
dropped or the pace of increase has moderated
ƒ Fuel group inflation moderated to 1.3% from 4.5% in August. In
September last year, most fuel prices were up 5-10%, leading to a higher
base creeping in. This along with current easing of global crude oil
prices led to a sharp deceleration in fuel group inflation
ƒ Core WPI also eased to 2.8% from 3.4% supported by a moderation in
global commodity prices and a stable rupee


LINK
http://content.icicidirect.com/mailimages/IDirect_Inflation_Oct14.pdf