India: Inflation slows in August
August 14, 2014
Consumer prices added 0.97% over the previous month, which came in below the 1.77% rise observed in July. July’s increase had registered the strongest rise on record. Annual inflation fell from 8.0% in July to 7.8% in August, which was on par with market expectations.
The wholesale price index (WPI) in August rose 0.60% over the previous month. The reading came in below the 0.87% increase registered in July. The mild increase was the result of lower prices for energy, particularly for petroleum products, as well as for clothing.
Wholesale prices rose 3.7% over the same month last year, which came in below both the 5.2% increase registered in July and market expectations of a 4.4% increase. The annual print marked a third consecutive month of moderation. Annual average WPI inflation fell from 6.2% in July to 5.9% in August.
Despite the deceleration in wholesale price inflation, most analysts continue to see risks to the inflation outlook due to forecasts for a milder monsoon season. Monsoon rains, which usually occur from June to September, were markedly lower than in previous years during the first half of the season. This is expected to push agricultural prices up in the coming months, thus threatening the inflation outlook.
Author: Ricardo Aceves, Senior Economist