India: Inflation decelerates in August for the second consecutive month
September 14, 2018
In August, consumer prices rose 0.43% from the previous month—down from the 0.94% rise in recorded in July. Higher prices for food and beverages underpinned the reading in August. Furthermore, prices for pan, tobacco and intoxicants; clothing and footwear; housing; and fuel and light also increased.
Despite a weakening rupee, inflation decelerated for the second consecutive month in August, coming in at 3.7%, which was down from 4.2% in July. A weak annual increase in prices for food and beverages weighed on the reading in August. Meanwhile, higher prices for fuel and light; housing; pan, tobacco and intoxicants; and clothing and footwear stoked inflationary pressures. Core inflation, which excludes food and energy products, slowed to 5.9% in August, down from 6.1% in July.
The wholesale price index (WPI) rose 0.3% from the prior month in August, less than the revised 0.5% increase in July (previously reported: +0.4% month-on-month). Wholesale price inflation decelerated to 4.5% in August, 0.6 percentage points less than in July. Lower prices for primary articles such as fruit and vegetables weighed on wholesale prices in August. On the other hand, a substantial increase in fuel and power prices, coupled with more expensive manufactured products, underpinned inflationary pressures. Meanwhile, annual average wholesale inflation accelerated to 3.9% in August from 3.8% in July.
India Inflation Forecast
FocusEconomics Consensus Forecast panelists expect consumer price inflation to average 4.9% in FY 2018, which is unchanged from last month’s forecast. In FY 2019, the panel expects consumer price inflation to average 4.7%. Meanwhile, our panel projects wholesale inflation of 4.0% for FY 2018, up 0.1 percentage points from last month’s report. In FY 2019, our panel foresees wholesale inflation averaging 3.4%.
Author: Edward Gardner, Economist