India: Inflation picks up in May
June 14, 2018
In May, consumer prices rose 0.51% from the previous month—more than the 0.44% rise recorded in April and representing the largest increase in six months. Prices rose across all major categories of goods and services in May. Most notably, prices increased strongly for both pan, tobacco and intoxicants, and food and beverages.
Inflation accelerated for the second consecutive month in May, hitting 4.9%. This was up from April’s 4.6% and matched market analysts’ expectations. Inflation was supported by higher prices across all major categories of goods and services in May compared to the same month in 2017. It was particularly driven by higher prices for both pan, tobacco and intoxicants, and housing. Core inflation, which excludes food and energy products, picked up to 6.3% in May from 6.1% in April. This was partly due to a base effect—core inflation was a relatively-mild 4.2% in the same month in 2017.
The wholesale price index (WPI) rose 0.94% from the prior month in May, which contrasted the revised 0.43% increase in April (previously reported: +0.69% month-on-month) and was the largest increase in ten months. Wholesale inflation, meanwhile, accelerated in May and came in at 4.4%, up from 3.2% in April. The acceleration was driven by high fuel and energy prices and resulted in the highest inflation rate since March 2017. Annual average wholesale inflation accelerated to 3.1% in May from 2.9% in April.
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 4.6%. Meanwhile, our panel projects wholesale inflation of 3.9% for FY 2018, unchanged from last month’s report. In FY 2019, our panel foresees wholesale inflation averaging 3.4%.
Author: Edward Gardner, Economist