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gpolit.com January 19, 2018


December India's retail inflation grows 5.21 percent

13 January 2018, 05:07 | Kenneth Drake

December India's retail inflation grows 5.21 percent

December India's retail inflation grows 5.21 percent

Analysts polled by Reuters had predicted December's consumer inflation rate would climb to 5.10%, the highest since July 2016, from 4.88% in November.

Core Inflation rose by 1.8%, beating expectations of only a 1.7% rise, the same as November - the Dollar rose and fell in volatile swings after the release of the contradictory data.

Inflationary risks forced the Reserve Bank of India (RBI) to hold its key lending rate unchanged for the third time in a succession at 6 per cent in its penultimate bi-monthly monetary policy review of the fiscal last month.

The United States' consumer price index grew by 0.1 percent in December relative to the previous month and the inflation rate for all of 2017 came in at 2.1 percent, the Labor Department reported Friday.

Weak import and producer price data this week had raised concerns about the inflation outlook, although the two reports do not have a strong correlation with the CPI. The cost of both hospital and doctor visits increased 0.3%.

Low base from November 2016 helps India Inc's output grow 8.4%.

Shelter costs rose 0.4 percent in the month, faster than usual, while medical care increased 0.3 percent and food was up 0.2 percent.

In the coming months, rising crude oil prices, which are at a 3 year high at the moment, could pose an even bigger risk to inflation in the country.

"The outsized core is due to a 1.4% jump in used auto prices - demand rocketed after the hurricanes in the summer, driving up auction prices", said Ian Shepherdson at Pantheon Macroeconomics. Cheaper petrol prices limited the increase in the overall CPI to 0.1% in December after climbing 0.4% in November.

But clothing prices fell for the fourth consecutive month, and airline fares fell 0.5% after a 2.4% drop in November. The statistical impact of an unfavorable base also rose the year-on-year print. Amid talk of whether a bear market in bonds is nigh, a resurgence in the consumer-price index would add to the growing feeling that the 10-year Treasury yield will finally break higher in 2018, after doing little last year.

Meanwhile, despite reports of healthy sales from some stores during the holiday shopping season, department store sales declined 1.1 percent from the prior month, while sporting goods stores fell 1.6 percent. Food away from home grew 0.2%.

Similarly, consumer non-durables' output rose by 23.1 per cent, and that of consumer durables by 2.5 per cent.

Economists, however, said it may be too early to term it as an industrial recovery.



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