Wholesale price inflation (WPI) edged down for the second consecutive month to 3.4 per cent in October, from 3.6 per cent in September. Food inflation continued to trend down, falling by 120 basis points (bps), while core inflation remained stagnant and fuel inflation rose further in October. Core inflation as measured by the CRISIL core inflation indicator (CCII) stood at 3.1 per cent versus 3.3 per cent in September.
Food inflation (primary plus manufactured food) fell to 6.3 per cent, from 7.5 per cent in September because of a fall in primary articles inflation, especially in fruits, vegetables, and spices. Inflation in food products (at 10.5 per cent), though moderated marginally in October, remained above 10 per cent, result of rising inflation in dairy products and high inflation in sugar. Overall inflation in manufactured products inched up to 2.7 per cent in October on the back of rising basic metals, non-metallic mineral products, leather and rubber inflation. In the âfuel and powerâ category, inflation rose to 6.2 per cent in October, from 5.6 per cent in September. This was led by rise in prices of petrol, high speed diesel, kerosene, and furnace oil.
For the past few months, an interesting phenomenon had emerged in the two core inflation measures. Not only were the two measures showing a divergent trend but the CCII measure also turned positive since December while the non-food manufacturing inflation measure remained negative.
In October, the non-food manufacturing inflation measure stood at 1 per cent, rising from September while CCII inflation, after entering the positive zone in December, was at 3.1 per cent.
The larger pick-up in CCII has been mainly led by a rise in inflation in processed food products (18 per cent weight in this index), beverages, tobacco and tobacco products.
The CCII offers a better perspective on core inflation as it negates the effect of volatile categories.
It excludes base metals as their prices are mostly determined by global demand-supply dynamics and volatility in exchange rates, rather than just domestic conditions. This exclusion causes a variance between CCII and non-food manufacturing inflation. Basic metals prices picked up marginally in October to 0.7%, with inflation in ferrous metals remaining negative at -0.6%. As a result, non-food manufacturing inflation remained much lower than the CCII in October.
