Services activity contracts, food inflation out of hand.
The manufacturing PMI numbers out earlier this week may have ignited macroeconomic hopes but worrisome services PMI and food inflation data brought the gloom back on Thursday.
Food inflation rose to a near nine-month high of 12.21 per cent for the week ended October 22. The widely tracked HSBC purchasing managers’ index (PMI) showed that private sector services activity contracted for the second month in a row in October. The reading contracted to a two-and-a-half-year low of 49.1 points against 49.8 points in the previous month.
Food inflation continued to be in double digits for the first three weeks in October and if manufactured products (which account for the bulk of overall inflation) do not witness a sharp fall in the rate of price rise, the headline number for October will be high. Overall inflation stood at 9.72 per cent in September despite some moderation.
While the spurt in food inflation could be attributed to a demand surge in the festival season, all hopes are now pinned on a bumper kharif output. If food inflation doesn’t calm down by November-December, the central bank may not be in a position to pause monetary tightening.