WPI inflation falls to over 2-year low; fuel prices pull down core inflation

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Updated: August 14, 2019 12:57:52 PM

The wholesale inflation has eased from 2.02 percent growth rate in the previous month and below the market expectations of 1.93 per cent, amid a slowdown in prices of both food and manufactured products while fuel cost declined faster.

wpi, wholesale prices, inflation rate, fuel price, retail price, retail inflation, cpi, mospi, food, fuel, manufacturingThe decrease in the prices of food, fuel, and manufacturing have been the main drivers of pulling down the whole inflation. (Bloomberg Image)

Wholesale prices in India rose by 1.08 percent year-on-year in July 2019, which is a 25-month low, according to the data released by CSO. The wholesale inflation has eased from 2.02 percent growth rate in the previous month and below the market expectations of 1.93 per cent, amid a slowdown in prices of both food and manufactured products while fuel cost declined faster. The decrease in the prices of food, fuel, and manufacturing have been the main drivers of pulling down the whole inflation. Wholesale prices of food grew at 6.15 per cent in July, as compared to 6.98 per cent in the previous month. Similarly, the wholesale prices of fuel grew at -3.64, in comparison to -2.2 per cent in the same period. Also, the growth of wholesale prices of manufacturing dropped from 0.34 per cent in July, as compared to 0.94 per cent in June 2019.   

Prices of primary articles grew at 5.03 per cent year-on-year in July, slower than 6.72 per cent in the month of June. Prices of vegetables grew at 10.67 per cent, compared to 24.76 per cent, milk prices grew at 0.28 per cent, compared to 0.91 per cent and the potato prices fell further to -23.63 in July 2019. In the manufactured products segment, prices of chemical & chemical products slowed down to 0.42 per cent from 1.45 per cent, textiles prices slowed down to 1.36 per cent from 2.67 per cent, while prices for basic metals further slowed down to -4.27 per cent. 

“Weak commodity prices, a mild appreciation of the INR as well as a lack of pricing power contributed to the sharp and fairly broad-based fall in the core inflation to a 33 month low 0.2% in July 2019,” said Aditi Nayar, Principal Economist, ICRA. Available trends suggest that the fall in wholesale food inflation in July 2019 may prove to be temporary and the rise in gold prices would push up inflation related to other manufacturing, she added.

The growth of wholesale prices in the month of May has also been revised to 2.79 per cent from 2.45 per cent recorded earlier. The rate charged by the manufacturer or distributor for an item is the wholesale price whereas the rate charged on the consumers for the same product is its retail price. Meanwhile, retail inflation in July 2019 has marginally eased to 3.15 per cent from 3.18 per cent in the previous month. Despite the rise in food inflation, the fall in fuel price has helped to bring down the retail inflation marginally.

 

 

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