India: Price pressures continue to soften in February
March 14, 2018
Consumer prices were down 0.37% from the previous month in February, as continued seasonal month-on-month declines in fruit and vegetables and softer global oil prices limited inflationary pressures in the month. February’s figure followed a 0.22% decline in January and marked the third consecutive month of decreasing consumer prices. February’s print was also the largest decline in over a year.
Inflation eased markedly to 4.4% in February from 5.1% in January, coming in well below market expectations of a softer deceleration to 4.7%. The decline was largely reflective of a sizeable decline across most food categories, including vegetables and fruits. Fuel inflation also moderated from 7.7% in January to 6.8% in February despite rigid domestic prices—petrol and diesel inflation accelerated in the month. The headline figure is likely to miss the RBI’s quarterly average forecast of 5.1% for the January-March period, although weakness in inflation may prove temporary ahead of imminent increases in the minimum support prices for agricultural products.
Core inflation, which excludes food and energy products, was unchanged yet again at 5.2% in February, as lower inflation in household goods—driven by easing pressures stemming from the implementation of the Goods and Services Tax—was offset by high transportation and housing inflation. Shelter inflation continues to reflect the impact of the central government’s house rent allowance (HRA) hike.
The wholesale price index (WPI) was unchanged from the previous month in February, which followed the meagre 0.09% increase recorded in January. In light of flat month-on-month growth, wholesale price inflation eased from 2.8% in January to 2.5% in February, the softest print in seven months. The softer figure was driven by lower inflation for food articles and fuels, which more than offset higher inflation for manufactured products. Annual average wholesale inflation eased from 3.3% in January to 3.1% in February, a five-month low.
India Inflation Forecast
FocusEconomics Consensus Forecast panelists expect consumer price inflation to average 4.7% in FY 2018, which is unchanged from last month’s forecast. In FY 2019, the panel expects consumer price inflation to average 4.8%.
Author: David Ampudia, Economist