Peak in the headline wholesale inflation is behind us - WPI Sep'21 - Acuité Insights

Mr. Suman Chowdhury, Acuité Ratings & Research, comments on the WPI data Sep'21

"Unlike a substantial moderation in headline CPI which is driven primarily by food inflation, the WPI inflation has slightly declined in Sep-21 at 10.66% vs 11.39% recorded in Aug-21. The sequential growth in the index has been nominal at 0.1%, reflecting the moderation in prices of primary articles and particularly food categories. While the annualised fuel and power inflation is still high at 24.8%, it has actually sequentially contracted in Sep-21. However, the pass through of higher commodity prices to manufactured products has continued with a sequential price expansion of 0.6% in that category.

The gap between CPI and WPI inflation indicates that the current inflationary risks are primarily emerging from the impact of commodity prices on the manufacturing sector where further pass through is likely as demand continues to improve. Although the food category may continue to provide relief in the near term, such transmission of production costs may keep core inflation at elevated levels. WPI core inflation has continued to be firm at 11.16% YoY and 0.58% MoM amidst increase in input prices. While we believe that the peak in the headline wholesale inflation is behind us, continuing supply side bottlenecks, raw material shortages and high commodity prices are likely to maintain the core inflation at such high levels."

Source : Equity Bulls

Keywords

Acuite WPI Sep2021