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WPI inflation eases to 10.7% YoY in Sep’21…

…on lower inflation in primary food articles

* Wholesale Price Index (WPI) based inflation eased to 10.7% YoY in Sep’21, against 11.4% YoY in Aug’21 and 1.3% YoY in Sep’20. The number is lower than our expectation of 11% and the Bloomberg consensus of 11.15% YoY in Sep’21. The lower WPI inflation was primarily attributable to eight-month low inflation in primary ‘food articles’; ‘fuel and power’ inflation also came in marginally lower last month.

* WPI inflation in ‘primary articles’ (WPI weight: 22.6%) came in at seven-month lows of 4% YoY in Sep’21 from 6.2% YoY in Aug’21, led by the second consecutive and highest (since the new series began in Apr’12) deflation of 4.7% YoY in ‘food articles’ last month. Within food, WPI inflation in vegetables came in at -32.4% YoY in Sep’21 (the highest deflation in the new series). Other primary articles such as ‘non-food articles’, ‘minerals’, and ‘crude oil and ‘natural gas’ saw higher WPI inflation in Sep’21 v/s Aug’21.

* WPI inflation in ‘fuel and power’ (WPI weight: 13.2%) came in at five-month lows of 24.8% YoY in Sep’21, against 26% YoY in Aug’21. This was driven by higher deflation in electricity and moderately lower inflation in mineral oil in Sep’21.

* WPI inflation in ‘manufactured products’ (WPI weight: 64.2%) came in marginally higher at 7.2% YoY in Sep’21 v/s 7.1% YoY in Aug’21, as higher inflation in items (including manufactured food), constituting 31.2% weight, saw higher inflation in Sep’21 v/s Aug’21.

* Consequently, while WPI food inflation (primary and manufactured) stood at eight-month lows of 1.1% YoY in Sep’21 v/s 3.4% YoY in Aug’21, WPI core inflation (non-food manufactured products) remained unchanged at 11.1% YoY in Sep’21.

* Overall, inflation data for Sep’21 (both CPI and WPI) has been broadly in line with expectations, with no major surprises. Therefore, we continue to expect gradual normalization in the monetary policy.

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