Wednesday 15 January 2014

December WPI eases to five month low at 6.16%; way lower than street’s expectations

Further cementing the case for RBI’s status-quo stance in its upcoming monetary policy review on January 28, India's main inflation gauge, based on monthly WPI, eased to five month low at 6.16% as compared to 7.52% in November and 7.31% during the corresponding month of the previous year. The figures were also way lower than street’s expectation. Markets after getting three-month low retail inflation figures were expecting WPI to cool down to 7% for the month of November. Surprisingly, October inflation was revised upwards to 7.24% against 7% earlier. Meanwhile, build up inflation rate in the financial year so far was 5.35% compared to a build up rate of 4.84% in the corresponding period of the previous year. Further, higher core inflation continued to remain a cause of worry as its stood at 2.8% for December as against 2.7% in the previous month.

The Wholesale Price Index for ‘All Commodities’ (Base: 2004-05 = 100) for the month of December, 2013 declined by 1.3 percent to 179.2 (provisional) from 181.5 (provisional) for the previous month. Out of this, Manufactured Products, the major group with weight of 64.97%, remained unchanged at its previous month's level of 151.9 (provisional). Within the group, index for Food Products group declined by 0.6% to 169.7 (provisional) from 170.8 (provisional) for the previous month due to lower price of gur (7%), tea leaf (unblended), gram powder (besan), tea leaf (blended) and copra oil (5% each), sunflower oil (4%), oil cakes and groundnut oil (3% each), soyabean oil (2%) and khandsari (1%). 

Meanwhile, Primary Articles, the group having a weightage of 20.12% in overall index, declined by 5.0% to 243.6 (provisional) from 256.3 (provisional) in November. The index for Food Articles group declined by 6.4% to 240.1 (provisional) from 256.4 (provisional) for the previous month due to lower price of fruits & vegetables (21%), fish-inland (8%), coffee (7%), tea and ragi (3% each) and gram, rice and mutton (1% each). 

Further, Fuel & Power, having weight of 14.91%, too rose by 0.8% to 211.3 (provisional) from 209.6  (provisional) for the previous month due to higher price of electricity (industry) (3%),  LPG (2%), high speed diesel, electricity (commercial), electricity (railway traction), aviation turbine fuel, bitumen and electricity (domestic) (1% each). However, the price of furnace oil (1%) declined.

The latest data print further bolsters the case for RBI keeping its key interest rates on hold for a second successive month at its policy review on January 28, after the dismal factory output data and three-month low Retail inflation figure. Bringing some relief to the policymakers who have an arduous task of pulling the economy out of a stagflation-like situation, the provisional annual inflation rate based on all India general Consumer Price Index (CPI) (Combined) eased more than the street's expectation, at a three-month low level of 9.87% for December 2013. Nevertheless, the latest data print also has partially built in the hopes of RBI slashing key policy rates by 25 basis points atleast by March 31, 2014.

No comments:

Post a Comment