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WPI inflation at 14.2% YoY in Nov’21…

…due to higher primary articles and fuel and power inflation

* Wholesale Price Index (WPI) based inflation came in at 14.2% YoY in Nov’21 as against 12.6% YoY a month ago. The number is higher than our forecast of 11.8% YoY and Bloomberg survey of 11.98% YoY. With this, WPI inflation during Apr-Nov’21 stood at 12.2% YoY as against a deflation of 0.2% YoY during Apr-Nov’20.

* WPI inflation in ‘primary articles’ (WPI weightage: 22.6%) came in at a nearly two-year high of 10.3% YoY as against 5.2% YoY a month ago. Within primary articles, food articles inflation shot up to 4.9% YoY in Nov’21 after three consecutive months of deflation. This drove overall high WPI food inflation to 6.7% YoY in Nov’21 as compared to 3.1% YoY in Oct’21. Inflation in manufactured food items actually reduced to 10.3% YoY in Nov’21 as against 12.7% YoY in Oct’21.

* ‘Fuel and power’ (WPI weightage: 13.2%) WPI inflation continued rising and stood at 39.8% YoY in Nov’21 v/s 37.2% YoY in Oct’21.

* WPI inflation in ‘manufactured products’ (WPI weightage: 64.2%), however, came in slightly lower at 11.9% YoY in Nov’21 as against 12% YoY in Oct’21.

* WPI core inflation (non-food manufactured products) also rose to 12.2% YoY last month v/s 11.9% YoY in Oct’21.

* While WPI inflation in Nov’21 was higher-than-expected, CPI inflation (RBI’s monetary policy anchor) was lower-thanexpected. Hence, we continue to expect a reverse repo rate hike of 15bp at the next monetary policy meeting in Feb’22.

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