Acuité Ratings & Research comments on WPI Inflation - Dec'22
Posted On:
2023-01-16 18:48:42 (Time Zone: IST)
Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research
"WPI inflation print in India continues to drop rapidly and at 4.95% for Dec-22 has subsided below 5% for the first time in 21 months. This is clearly driven by the moderation in global commodity prices including that of food. The incremental relief is reflected in the disinflation of primary articles where prices saw a sequential contraction for successive two months at 1.93% and 2.98% in Nov-22 and Dec-22 respectively.
What is also noteworthy is the sequential inflation in manufactured products has remained zero or in the negative zone since Aug-22. This reflects a larger slowdown in manufactured goods at a global level along with the correction in input prices. What's encouraging to see is the quicker drop in core WPI inflation which declined to 3.19% in Dec-22 from 7.03% in Sep-22.
The sharper drop in wholesale inflation is likely to translate into a steady downtrend in headline CPI inflation in Q4FY23 unless any new surprises come up. While we continue to forecast another 25 bps of rate hike by MPC in Feb-23, the likelihood of a pause has increased with the latest CPI and WPI data prints."
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