WPI inflation surprises negatively: Angel Broking

Key highlights

 The Wholesale Price Index (WPI) based inflation surprised negatively during November 2013 by coming in at 7.52% higher than market expectations of 7.00%.

 The headline print edged higher as compared to inflation hovering at about 7.00% in three preceding months and 7.24% in November 2012.

 During the month, inflation across major components – primary articles, fuel and power and manufactured products has witnessed an uptick as compared to that in the previous month.

 Food inflation persisted at an uncomfortably high level of 19.93%, a 41-month high owing to elevated vegetable prices for the fifth straight month.

 Inflation for September 2013 has been revised higher to 7.05% from 6.46% reported earlier on upward revision across the major components.

 We expect the RBI to hike its policy rate by 25bp in the upcoming policy review on December 18 in light of its continued focus on restraining inflation and anchoring inflationary expectations.

Trends in WPI Inflation for November 2013

Primary articles – weightage 20.1% During November 2013 primary articles reported inflation at 15.92% as compared to 14.68% in October 2013 and 9.56% in the corresponding period of the previous year. The rise can be attributed mainly to higher food inflation led by elevated vegetable prices for the fifth straight month. Also, the non-food primary articles component reported an increase in inflation to 7.60% from 6.79% in the previous month. Inflation in minerals eased from 7.03% in October 2013 to 6.09% during November 2013. Food articles: Food inflation surged to 19.93%, a 41-month high as compared to 18.19% in the previous month and 8.80% in November 2012. Vegetable inflation came in at a whopping 95.25% as compared to 78.38% in the previous month but it is expected to cool down going forward and provide some respite to headline food inflation. Although cereals inflation has persisted at double-digit levels over the past 16 months, it eased to 11.32% as compared to 12.00% in the previous month. Pulses reported a 10.56% decline over the year ago period and as compared to 11.19% in the previous month, continuing to remain in deflationary territory for the fifth straight month. Source: Angel Broking

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