WPI inflation at five-month highs of 12.5% YoY in Oct’21 - Motilal Oswal
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WPI inflation at five-month highs of 12.5% YoY in Oct’21…
* Wholesale Price Index (WPI) based inflation came in at a five-month high of 12.5% YoY in Oct’21, against 10.7% YoY in Sep’21. The number is higher than our estimate of 10.7% YoY and the Bloomberg consensus of 11.1% YoY. Higher WPI inflation was led by a broad-based rise in components of wholesale inflation.
* WPI inflation in “primary articles” (WPI weight: 22.6%) rose to 5.2% YoY in Oct’21 (v/s 4% YoY in Sep’21) on account of higher inflation in “non-food articles” and “crude petroleum and natural gas” during the month. WPI inflation in “primary food articles” remained in the deflationary zone for the third consecutive month (albeit at the lowest level) in Oct’21. While WPI inflation in “food grains” rose in Oct’21, inflation in “fruits and vegetables” remained negative.
* WPI inflation in “manufactured products” (WPI weight: 64.2%) also came in higher at 12% YoY in Oct’21, against 11.4% YoY in Sep’21. This was led by higher inflation in 15 items (including chemicals, non-metallic mineral products, basic metals, electric equipment, and machinery and equipment), which accounted for ~40% weight. WPI inflation in “manufactured food products” remained unchanged for the third consecutive month at 12.7% YoY in Oct’21.
* Due to lower deflation in “primary food articles”, WPI inflation in “food” (weight: ~24%) came in higher at 3.1% YoY in Oct’21 (v/s 1.1% YoY in Sep’21).
* “Fuel and power” (WPI weight: 13.2%) WPI inflation continued to rise and stood at 37.2% YoY in Oct’21 (v/s 24.8% YoY in Sep’21).
* WPI core inflation (non-food manufactured products) also rose to 11.9% YoY in Oct’21 v/s 11.1% YoY in Sep’21.
* Overall, while WPI inflation in Oct’21 was higher than expected, CPI inflation came in largely stable and in line with our expectations. Therefore, we continue to expect only gradual normalization in monetary policy.
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