IGI Logo

WPI rises to 2.4% in Dec’24

Food prices remain elevated

* The Wholesale Price Index (WPI)-based inflation inched up to 2.4% in Dec’24 (vs. 1.9% in Nov’24 and 0.9% in Dec’23), mainly led by elevated food prices (especially vegetables) and a slower pace of contraction in prices of fuel & power items (the slowest contraction in the past four months). WPI-based inflation remained positive for the 12th consecutive month after having been in the deflationary zone for the majority of the previous financial year (Exhibit 1). Sequentially, WPI dipped 0.4% in Dec’24, similar to Nov’24. The figure was higher than the Bloomberg consensus of 2.2%, but it was in line with our expectation of 2.2%.

* The acceleration in WPI was primarily driven by elevated food prices (8.9% YoY in Dec’24, similar to Nov’24). WPI, excluding food, contracted 0.3% in Dec’24 vs. a contraction of 1.0% in Nov’24. (Exhibit 2). Within the food category, prices of primary food articles increased 8.5% in Dec’24 vs. 8.6% in Nov’24 (the lowest in four months), while prices of manufactured food products increased 9.7% in Dec’24 vs. 9.4% in Nov’24. Within the primary food articles category, higher food inflation was driven by an increase in the prices of vegetables and fruits.

* Additionally, WPI for fuel and power contracted 3.8% in Dec’24 (the lowest contraction in four months), following a contraction of 5.8% in Nov’24, led by a slower pace of contraction in the prices of mineral oils (-3.8% in Dec’24 vs. -5.8% in Nov’24) and electricity (-10.4% in Dec’24 vs. -5.7% in Nov’24).

* WPI for non-food manufacturing products increased 0.7% in Dec’24 (vs. 0.5% in Nov’24, the highest in five months), led by a rise in the prices of textiles, basic chemicals, fertilizers, non-metallic mineral products, and motor vehicles & transport equipment.

* Agro inflation mounted to 7.4% in Dec’24 from 6.9% in Nov’24. Simultaneously, agro-input prices contracted 1.6% YoY in Dec’24 (a slower contraction than the last month) vs. a contraction of 4.1% YoY in Nov’24. Consequently, the agricultural terms of trade growth decelerated to 9.1% in Dec’24 (vs. 11.5% in Nov’24, the highest in four months; Exhibit 4). Prices of imported items increased to a five-month high of 1.0% in Dec’24 (0.3% in Nov’24). Conversely, non-agro domestic inflation rose 0.7% YoY in Dec’24 (vs. +0.3% in Nov’24; Exhibit 3).

* We expect WPI inflation to mount in the coming months as the favorable base effect wanes. We anticipate WPI to rise to ~2.5-3.0% in Nov’24.

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412