1. WPI inflation at -0.73% in Dec as food prices rise

WPI inflation at -0.73% in Dec as food prices rise

Wholesale price inflation hit -0.73% in December — retreating from -1.99% recorded in the previous month but still remaining in the negative zone for 14 months in a row — mainly on a spurt in food prices and an unfavourable base, showed the official data released on Thursday.

By: | New Delhi | Published: January 15, 2016 12:28 AM

Wholesale price inflation hit -0.73% in December — retreating from -1.99% recorded in the previous month but still remaining in the negative zone for 14 months in a row — mainly on a spurt in food prices and an unfavourable base, showed the official data released on Thursday.

The narrowing of deflation for a fourth straight month in December suggests producers’ pricing power has improved a tad, although it still remains dented due to the crash in global commodity prices. According to the data released earlier this week, retail inflation also rose to 5.61% in December, its highest since September 2014, marking a fifth straight month of rise.

Food inflation in the wholesale price index (WPI) inched up for a fourth straight month to touch 8.17% in December, compared with 5.20% in November. This is because inflation in pulses continues to remain high (55.64%) and that in vegetable surged to 20.56% in December from 14.08% in the previous month. Retail food inflation also rose to 6.40% in December from 6.07% in the previous month. Even the non-food items in the primary article segment in the WPI rose for four months in a row, jumping to 7.7% in December from 6.3% in the previous month.

Fuel and power inflation hit -9.15% in December, against -11.09% in the previous month, reflecting subdued global crude oil prices, although the hike in the excise duty may have helped narrow the deflation a tad. Inflation in manufactured items stood at -1.36% in December, compared with -1.42% in November.

Although global commodity prices continue to remain subdued and crude oil prices hover around 12-year lows, the stickiness in food inflation and unfavourable base may drive up price pressure, especially at the wholesale level. Nevertheless, inflation is unlikely to rise irrationally in the remaining months of this fiscal even though some uptick is expected.

CARE Ratings estimates WPI inflation to inch up to 2% by March, while analysts believe the consumer price-based inflation will remain the central bank’s targeted level of 5.8% by January.

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