IIP growth boosted to 7.5% on courtesy in manufacturing, capital, consumer goods

Carla Harmon
March 14, 2018

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in February on a seasonally adjusted basis after rising 0.5 percent in January, the U.S. Bureau of Labor Statistics reported today.

In February, consumer food price index softened to 3.26 per cent as against 4.7 per cent in January.

Average hourly earnings edged up four cents, or 0.1 percent, to $26.75 in February, a slowdown from the 0.3 percent rise in January. Focus now turns to United States consumer price data due later on Tuesday for the global markets to gauge inflation trends in the world's largest economy and as a guide for upcoming Federal Reserve policy. Consumer price inflation (CPI) was at 5.07% in January. A stronger than expected inflation report could be the catalyst that drives prices out of the current trading range. Its positive correlation with the core CPI suggests that this measure would remain below the Fed's 2.0% inflation target when the February numbers are released. We have also noted price increases across some major food items during our food survey in the month.

Separately, India's annual industrial output grew 7.5 percent in January, data released on Monday showed, compared with 6.7 percent forecast in a Reuters poll. Year-over-year Core CPI (ex Food and Energy) came in at 1.85%, up from the previous month's 1.82%.

"The eventual rabi harvest, distribution of the 2018 monsoon and the operationalization of the proposals made in the Union Budget for FY19, including the launch of Operation Greens and the augmentation of minimum support prices, would impact the trajectory of food inflation going forward", she added. IIP grew at 4.1 per cent in April-January this fiscal as compared to 5 per cent in same period in previous financial year. It is set to increase by just 0.2% for both headline and core, which should keep the core year over year pace unchanged at 1.8%.

Along with the Quick Estimates of IIP for the month of January 2018, the indices for December 2017 have undergone the first revision and those for October 2017 have undergone the final revision in the light of the updated data received from the source agencies, as per CSO.

After this, analysts believe that Reserve Bank of India would hold rates steady during its review meet. It had increased its inflation projection to 4.3-4.7% in H2FY18 as compared to its earlier projections of 4.2-4.6%.

In addition, the higher oil price not only directly increases energy prices but also indirectly works to make transportation more expensive.

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