WPI numbers for November 2013 to be released on Monday may correct to levels below CPI food, forecasts an SBI research note. If not, CPI food inflation will head higher
CPI (consumer price index) inflation jumped to 11.24% for November 2013. The jump in CPI inflation to 11.24% for Nov’13 was not entirely unexpected, as the gap between CPI food and WPI (wholesale price index) food is getting corrected, with the gap now narrowing down to 375 basis points. Hypothetically, WPI numbers for November 2013 to be released on Monday (16 December 2013) should decline, with WPI food correcting to levels below CPI food, remarks an SBI research note on inflation data.
However, if that is not the case, and WPI food declines only marginally in Nov, then a further upside to CPI may not be even ruled out, forecasts the SBI research note. The good news is perhaps a significant base impact on CPI beginning December 2013. Also, core CPI has edged down in Nov’13, implying the CPI increase has been entirely food driven.
The inflation indices divergence is shown in the following chart from the SBI research note:
According to the SBI research note, IIP (index of industrial production) growth for October 2013 has declined by 1.8%. The bad news is that the pace of growth in export oriented sectors slowed down in October 2013, notably that of apparel & leather. The most worrying aspect of the IIP data is the continued dismal performance of consumer durable sector (for the ninth straight month) with consumer durables and even consumer non-durables recording a decline of at 12.0% and 1.8% respectively.
As far as IIP numbers are concerned, SBI research analysts believe that consumer durables de-growth may have bottomed out, if the trends in CPI- household requisites price trends are an indication.
The IIP data analysis is shown in the following table:
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