India: Inflation again rises less than expected in May
Latest reading: Consumer prices increased 3.9% in annual terms in May, following a 3.5% increase in the prior month. May’s reading was the highest in 16 months, but was again below market expectations and the Reserve Bank of India’s 4.0% target as government measures insulated consumers from the impact of the Iran war.
Relative to the prior month’s data, there were higher price pressures for food and non-alcoholic beverages (+4.8% in annual terms vs +4.2% in April) and transportation (+4.6% vs +4.0% in April).
Lastly, consumer prices were up 0.75% in May on a month-on-month basis, following a 0.27% increase in the prior month.
Panelist insight: Nomura’s Aurodeep Nandi and Sonal Varma commented:
“By our estimates, headline inflation is tracking ~4.2% y-o-y in June from 3.9% in May, reflecting higher petrol/diesel and LPG prices, pickup in food prices and a further pass-through of higher input cost to core inflation, although gold prices have fallen. Beyond June, as inflation base effects turn adverse in H2 FY27 (October-March), we expect the inflation rate to escalate to 5.8-6.0%, averaging 5.0% in FY27.”