Mr. Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research, comments on WPI Feb-2022.
"The WPI print for Feb-22 has inched up again to 13.11% YoY from 12.96% in Jan-22 with a materially higher sequential expansion of 1.4% as compared to a slight sequential contraction seen in the previous month. Clearly, the data reinforces the presence of inflationary pressures in the manufacturing and the services sector.
While the sharp rise in crude oil prices and the breach of USD 100 pb consequent to the intensification of the Russia-Ukraine conflict began only at the end of Feb-22, there has been an uptrend in commodity prices since Jan-22 and this is visible in both the sequential rise in primary commodities and fuel and power index of 1.1% and 4.3% respectively. Clearly, this upward momentum is set to continue in Mar-22 as the crude oil prices have shot up further and is currently hovering close to USD 110 pb (Brent). The inflation levels would have been slightly higher had there not been a sequential price contraction in the wholesale food category driven by the seasonal drop in vegetable and potato prices. The inflation in manufactured products have risen sequentially to almost 1.0% and also increased on a YoY basis to 9.8%.
Further, WPI core inflation (non-food manufacturing inflation) is estimated to have increased slightly to 10.0% YoY in Feb-22 from 9.7% YoY in Jan-22, with a sequential rise of 0.79% vs 0.48% in the previous month. Amidst increasing pressures on the profit margins of manufacturing companies and a pickup in consumption demand, Acuité expects a further pass through of input costs. We expect persistent supply side bottlenecks and high commodity prices to hold the core inflation at double digit levels in the near term."