Executive Summary: The Consumer Price Index (CPI) is a measure of the average change over time in the prices including food, clothing, fuel, transportation others serves that people buy on daily basis for living. The CPI is measure by Central Statistics Office (CSO) and is often used by the RBI to gauge the health of economy.
Key Highlights:
- Jul ‘18 consumer inflation cooled to 4.17% from 5% in Jun ‘18.
- Food inflation saw moderate fall at 1.37 % from revised of 2.90% in Jun ‘18.
- Energy inflation surged to 7.96% from previous of 7.14% in Jun ‘18.
- Clothing & Footwear inflation stood at 5.28% from 5.67% in Jun ‘18.
- Housing inflation fell marginally to 8.30% from previous 8.45%.
Inflation Rate (Month over Month):
The consumer inflation for Jul ’18 fell to 4.17% (Refer to graph 1) from multi-month high of 5% in Jun ’18 mainly on back of slowdown in food price. Last month owing to surge in energy and food price, consumer inflation shot to two year high at 5% adding additional pressure for monetary tightening by central bank. Factoring rising inflationary risk, RBI hiked its key lending rate by 25 bps to 6.5% for 2nd consecutive time since Aug ’18.
The latest inflation figure is expected to keep RBI under comfort zone in its upcoming meeting on Oct’18 and may even maintain status quo for rest of the FY 19, if inflation continues to decline near to targeted levels of 4%.
Observation:
Accordingly to latest inflation figure, fall in inflation to 4.17% from 5% was mainly on back of declined food price including vegetables (-2.19%), pulses (-8.91%) and Sugar (-5.81) items. Please refer table 1. Whereas protein rich items like meat & fish (2.26%), milk (2.96%), eggs (7.41%) recorded hike.
Inflation from Pan, tobacco & intoxicants fell to 6.34% in Jul 18 from 8.05 % in Jun 18.
While on the other hand, non-food categories, the “fuel and light” segment’s inflation rate accelerated to 7.96% in Jul ‘18. Higher oil price and uncertainty arising from geopolitical concern were some of the possible reason for growth in energy inflation.
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