India: Inflation moderates in May
Consumer prices rose 0.94% in May over the previous month, below April’s 1.43% increase. May’s result marked the weakest reading since February. Looking at the details of the release, the change in the prices for food and beverages was largely stable in May. In contrast, prices for fuel and light grew at a softer rate. Meanwhile, clothing and footwear prices accelerated.
Inflation eased to 7.0% in May, following April’s 7.8%. Annual average inflation rose to 5.9% in May (April: 5.8%).
Analysts at Nomura said:
“We believe inflation is yet to peak. Global commodity prices remain elevated, and firms continue to face margin pressures despite passing on costs to consumers. This is likely to be exacerbated by the ongoing power crunch, with firms facing higher cost of power and electricity tariffs likely to be revised upwards. Rising crude oil prices may negate the recent cut in fuel excise taxes. Despite the relatively measured rise in Kharif crop minimum supporting prices, lower production due to a heat wave, higher input and feedstock costs, and elevated levels of global prices imply that food inflation is likely to remain elevated. Finally, we remain alert to second-round effects, through higher inflation expectations, wages and rents, leading to persistence of inflation.”