Economy

Retail inflation rose to 3.21% in August - the highest in 10 months

September 13, 2019 07:02·
Fed Chair Jerome Powell said last week he was not forecasting or expecting a recession but reiterated the US central bank would continue to act 'as appropriate' to keep the expansion now in its 11th year on track. — Reuters pic

Fed Chair Jerome Powell said last week he was not forecasting or expecting a recession but reiterated the US central bank would continue to act 'as appropriate' to keep the expansion now in its 11th year on track. — Reuters pic

The consumer price index (CPI) based retail inflation for July was 3.15 percent, data released by the Central Statistics Office (CSO) showed.

Though CPI inflation is below the RBI's target of less than 4 per cent, the 13th consecutive month that it has remained so, it has gradually inched up from December 2018.

According to data released by the government's statistics wing, the rate of industrial production, as reflected by the Index of Industrial Production (IIP), came in at 4.3 per cent in July as against 1.1 per cent in June and 6.5 per cent in July previous year.

Inflation in the food basket was 2.99 per cent, up from 2.36 per cent in July. Clothing and footwear category, however, saw inflation easing somewhat to 1.23% from 1.37% over the same period.

Aditi Nayar, principal economist at ICRA, the Indian arm of Moody's, said the high frequency data for August 2019 revealed a recovery was not under way, despite a pick-up in industrial growth in July 2019. In the 12 months till August, the CPI increased 1.7 per cent after advancing 1.8 per cent in July.

The retail inflation in health was 7.84 per cent, recreation and amusement 5.54 per cent and personal care and effects 6.38 per cent.

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Inflation in meat and fish basket was 8.51 per cent, pulses and products 6.94 per cent and vegetables 6.9 per cent.

"The numbers provide some positive news for the output scenario because most of the IIP indicators show an uplift", said D.K. Srivastava, chief policy adviser, EY India.

July was the only month this year when the figure showed a decline after rising gradually since January.

Factory output, as measured by the Index of Industrial Production (IIP), had expanded 6.5 percent in July 2018. The core PCE price index rose 1.6 per cent on a year-on-year basis in July and has fallen short of its target this year. The only solace was in the mining sector, which grew at 4.9 per cent in July as against 3.4 per cent in the corresponding month of the last fiscal.

The cumulative growth for the period April-July 2019 stood at 3.3 per cent, down from 5.4 per cent growth in the same period a year ago.

The reading of these two key economic indicators has prepared the ground for one more rate cut by the Monetary Policy Committee (MPC) when it convenes for its next bi-monthly meeting next month, experts say.

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