WPI inflation marginally higher at 11.4% YoY in Aug`21 - Motilal Oswal
WPI inflation marginally higher at 11.4% YoY in Aug’21…
…due to higher inflation in non-food items
* Wholesale Price Index (WPI) based inflation inched higher to 11.4% YoY in Aug’21 from 11.2% YoY in Jul’21. The number is higher than our forecast of 10.7% YoY and market consensus of 10.8% YoY. The marginally higher WPI in Aug’21 was led by higher inflation in non-food (both primary and manufactured) items.
* WPI inflation in ‘primary articles’ (WPI weight: 22.6%) came in at 6.2% YoY last month on account of non-food articles and minerals – inflation in non-food articles rose to 28.8% YoY in Aug’21 (v/s 22.9% YoY in Jul’21), while that in minerals rose to 14.5% YoY in Aug’21 (v/s 2.7% YoY in Jul’21). Primary food articles, however, exhibited deflation of 1.3% YoY in Aug’21 (for the first time in seven months) after exhibiting no inflation at all in Jul’21. Within food, vegetables and fruits dived deeper into deflation in Aug’21 vis-à-vis Jul’21.
* WPI inflation in ‘manufactured products’ (WPI weight: 64.2%) also came in moderately higher at 11.3% YoY in Aug’21 (from 11.2% YoY in Jul’21), weighed by higher inflation in non-food manufactured items (including textiles, chemical products, basic chemicals, fertilizers, fabricated metal products, electric equipment, and motor vehicles). This accounted for ~38% weight in the WPI. Manufactured food products inflation, which constitutes ~9% weight in the basket, came in at five-month lows of 12.6% YoY in Aug’21 (from 13.1% YoY in Jul’21).
* Consequently, WPI food inflation (primary and manufactured) stood at seven-month lows of 3.4% YoY in Aug’21 v/s 4.4% YoY in Jul’21.
* WPI inflation in ‘fuel and power’ (WPI weight: 13.2%) came in flat at 26% YoY in Aug’21 as higher inflation in coal and mineral oils was offset by higher deflation in electricity.
* Overall, the difference in the weightage of food between the two baskets of WPI and Consumer Price Index (CPI) is clearly visible in today’s data. As CPI food constitutes ~40% of its basket, lower food prices have brought down CPI inflation to four-month lows of 5.3% YoY in Aug’21. However, in WPI, food constitutes only ~24% of the basket, with nonfood manufactured products constituting ~55%, which resulted in marginally higher WPI inflation in Aug’21.
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