Home / Business / Money / October CPI seen at 5.63%, Sept IIP at 2%

October CPI seen at 5.63%, Sept IIP at 2%

Inflation based on the Consumer Price Index (CPI) for the month of October is seen at 5.63 percent versus 6.46 percent on a month-on-month basis, another new low for the index since it started in January 2012, says a CNBC-TV18 poll. Even the industrial output (IIP) for September is expected to come at 2 percent versus 0.4 percent in August.

CPI-based inflation eased for the second month in a row to 6.46 percent in September, compared with a downward revised 7.73 percent a month ago. It is expected to come in at its lowest since the new index was started on the back of a recovery in monsoon, which prevented food inflation from becoming a nasty shock.

Following the trend of past three months, one can see that food inflation peaked in July and after that it has been falling month-on-month. In July, it stood up 2.7 percent against the previous, while it fell by 1.6 percent and 0.3 percent in August and September, respectively. October prices are expected to be down by about 7 percent against September on a sharp fall in vegetable and cereal prices.

Likewise, the overall inflation, due to a fall in food inflation, has been receding month-on-month. It was 1.7 percent in July (MoM), fell to 0.9 percent in August, was 0 in September. There has been no change between August and September numbers at an overall index level. Thus, one can see that the momentum has been lost.

On the weak growth part, rural wages up until last year were rising at an annual tick of like 15-20 percent. This year they have risen by just 5 percent and because of that, minimum support prices (MSP) is lower. It is barely 4 percent for rabi. That means purchasing power is lower. All these are likely to bring inflation down to the magical number of 5.6 percent. We have not seen a CPI like that in many years certainly not in the new index. That is the positive on macro data.

However, industrial output numbers (IIP), expected at 2 percent, could be bit of negative news. According to the poll, it can range from 1 to 2 percent, while many respondents also gave zero as the expected IIP growth, which means no growth at all.

Core sector, which accounts for a good 38 percent in the IIP basket, grew only by 1.9 percent compared to 5.8 in August. In it, there was a slowdown in electricity, steel, fertiliser and refinery. All these grew but were slow. Even cement, coal did better month-on-month but that was slower than August.

Car sales in September was nothing much to write to about. And even the September IIP base was very low. September 2013 was very bad. So that might give it this 1-2 percent uptick. By itself September was a bad month. The other thing that might work in favour of September giving it that 2 percent, is the fact that August and July were miserable. Usually there is a mean reversion, orders which had accumulated in July and August could get implemented in September. This might bring it to 2 percent but whatever the number, up until 2-3 percent, it will be considered dismal by economists.


Check Also

Rupee recovers 6 paise to 67.01

The rupee today recovered some lost ground by rising 6 paise to ...

Notes ban to have positive impact on economy

NEW DELHI: The government’s demonetisation move has led to widespread adoption of ...