Wednesday, 13 November, 2019

Retail inflation softens to 19-month low of 2.05% in January

Reserve Bank of India head office in Mumbai | Punit Paranjpe  AFP  Getty Images Reserve Bank of India head office in Mumbai | Punit Paranjpe AFP Getty Images
Ginger Lawrence | 13 February, 2019, 13:54

On a month-on-month basis, however, the industrial growth as measured by the Index of Industrial Production (IIP), increased from 0.3 per cent in November.

Consumer prices rose 2.05% in January from a year earlier That's slower than the 2.5% median estimate in a Bloomberg survey Consumer food price inflation fell 2.17% in January vs a 2.65% fall in December India's factory output rose 2.4 percent in December, faster than the revised 0.3 percent gain in the previous month, figures released separately by the government showed Data due Thursday will probably show India's wholesale price inflation softening to 3.7% and the trade deficit widening further in January. In its February 7 policy statement, it projected consumer inflation at 3.2-3.4 per cent in the first half of next financial year, beginning April 1.

Industrial production grew 2.4% in December as compared to 7.3% in the corresponding period in 2017-'18, according to the data released by Ministry of Statistics and Programme Implementation on Tuesday. In urban areas, the inflation rate was 2.91%, the same as in December.

The manufacturing sector grew 2.7% in December, while electricity sector grew 5.5%.

Clothing and footwear prices had a small downward pull on inflation with prices falling by 1.3 per cent for the year to January.

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The "food and beverages" segment registered a deflation of 1.29 per cent in January as against 1.49 per cent deflation a month ago.

The prices of vegetables declined 13.32% while prices of sugar and confectionery dropped 8.16%.

"The implication is that second round effects are much more muted, and shocks to food and fuel prices do not propagate as strongly into core inflation", JPMorgan economists Sajjid Chinoy and Toshi Jain wrote in a recent note.

British inflation fell to a two-year low in January, dipping below the Bank of England's target and offering some relief to householders who have tightened their belts ahead of Brexit. The Reserve Bank of India, which reduced the key lending rate by 0.25 per cent last week, mainly factors in CPI-based inflation while arriving at its bi-monthly monetary policy. B Prasanna, head, Global Markets Group, ICICI Bank said, "The CPI number surprised positively and core inflation also moved lower".

Separately, the ONS said United Kingdom house prices in December rose by an annual 2.5 percent, the smallest increase since July 2013. "Our expectations for the next few months are also very benign on headline CPI and hence we believe that there is room for further accommodation in the next policy meeting".