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Inflation
Weights(%)
100.0
39.1
47.3
6.8
Mar-16
4.83
5.19
4.77
3.38
Apr-16
5.47
6.40
4.89
3.03
May-16
5.76
7.55
4.68
2.94
Mar-16
5.27
8.51
5.50
5.31
3.38
4.01
Apr-16
6.29
8.04
5.56
5.37
3.03
4.26
May-16
7.20
7.82
5.37
5.35
2.94
3.96
Components of CPI
Items
Food&bev.
Pan,tob& intox.
Cloth & Foot
Housing
Fuel & light
Misc.
Weights(%)
45.9
2.4
6.5
10.1
6.8
28.3
-2
-4
-6
Jan-15
-0.9
Feb-15
-2.2
Mar-15
-2.3
Apr-15
-2.4
May-15
-2.2
Jun-15
-2.1
Jul-15 -4.0
Aug-15 -5.1
Sep-15 -4.6
-3.7
Oct-15
-2.0
Nov-15
-1.1
Dec-15
-1.1
Jan-16
-0.9
Feb-16
-0.5
Mar-16
Apr-16
May-16
(%)
The increase was driven by food prices. Consumer food price index
soared to 7.5% from 6.4% in April 2016. Price rise in vegetables, eggs,
pulses, sugar and meat & fish were major contributors to food inflation
WPI May 2016 inflated to 0.79% and maintained the positive territory for
the second consecutive month. Core WPI at -0.43% signifies a slack in
demand for input commodities
CPI jumped to 5.76%, highest ever since August 2014. Food inflation at
7.55% continued to put pressure on headline CPI. Vegetable inflation
rose to 10.8% YoY in May from 5% in April. On an MoM basis, vegetable
inflation grew at 7.4% in May vs. 3.9% in April. Egg increased 9.1% YoY
compared to 6.6% in April. Fruits witnessed inflation of 2.64% whereas
sugar grew 14% YoY. Water shortages in key sugar producing states like
Maharashtra and Karnataka led to shortages in production, which led to
a steep increase in sugar prices. Barring oils, fats and non-alcoholic
beverages, food inflation was mainly broad based. Pulses prices grew on
a month on month basis for a second consecutive month and remained
a cause of concern as it is the highest contributor to the headline CPI
Core inflation edged down to 4.5% in May. The major contributor was
transport and communication inflation, which grew only 0.63% YoY in
May compared to 1.82% in April. Clothing inflation cooled off to 5.37%
YoY from 5.56% in April while services inflation also fell to 3.96% YoY in
May from 4.26% in April
Apr-16 May-16
0.34
0.79
2.34
4.55
-4.83
-6.14
0.71
0.91
Weights
Feb-16 Mar-16
100.0
45.9
6.8
10.1
6.5
28.3
100.0
20.1
14.9
65.0
-0.24
-1.07
0.33
0.81
0.54
0.51
-0.74
-2.65
-1.12
0.33
0.00
0.00
-0.65
0.40
0.23
0.17
0.69
0.12
2.38
0.59
Apr-16 May-16
1.03
1.46
0.00
0.56
0.38
0.59
0.97
1.30
1.74
0.58
1.02
1.67
0.33
0.32
0.31
0.58
1.36
2.41
2.79
0.45
WPI May 2016 came in at 0.79%, higher than the previous month at 0.34%. The major driver was primary articles, which grew 4.6% YoY in
May compared to 2.3% YoY in April. In primary articles category, food
articles increased the highest by 7.9% YoY in May from 4.2% in April
Research Analyst
Sachin Jain
sachin.ja@icicisecurities.com
Isha Bansal
isha.bansal@icicisecurities.com
The sharp increase in inflation, led by food inflation was above market
expectations. The hike in vegetable prices seems to be seasonal and is
expected to subside in coming months. Additionally, the positive base effect,
which is to kick in from June, will pull vegetable inflation further down. The
progress and spatial distribution of monsoon will be critical in deciding the
future inflation figures.
The Reserve Bank of India will monitor macroeconomic and financial
developments for any further scope for policy action. It expects inflation to
reduce down to 5% by March 2017. Although the central bank has enough
leeway time wise, firming international commodity prices, especially crude
oil and implementation of Seventh Pay Commission are going to put upward
pressure on inflation in coming months. Consequently, we expect a 25 bps
rate cut in this fiscal, provided inflation numbers roll out as per expectations.
Exhibit 1: CPI Breakdown by components (YoY %)
7.55
8.0
7.0
6.0
5.0
4.83
5.47 5.76
6.40
5.19
4.0
3.03 2.94
3.0
2.0
1.0
0.0
CPI
CFPI
Core CPI
Mar-16
Apr-16
Fuel
May-16
5.35
5.37
5.56
5.37
5.73
6.14
5.85
5.54
4.49
4.39
Housing
Apr-16
May-16
Education
Recreation and
amusement
Transport and
communication
1.82
5.10
5.21
Health
0.63
4.83
4.85
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Page 2
Jan-16
6.66
2.19
8.23
4.00
6.36
-0.24
6.39
43.32
-1.72
10.56
4.60
6.79
9.03
5.71
5.20
5.32
3.95
5.17
5.63
1.55
4.90
5.51
3.43
Feb-16
5.52
2.18
7.19
3.66
5.33
-0.64
0.70
38.30
0.61
9.87
4.24
6.50
8.30
5.52
5.33
4.59
4.38
4.88
5.25
2.39
4.79
5.68
4.77
Month
Mar-16
5.27
2.43
7.74
3.33
4.85
-1.10
0.54
34.15
3.92
9.58
4.15
6.23
8.51
5.50
5.31
3.38
4.01
4.95
5.31
0.91
4.68
5.66
5.68
Apr-16
6.29
2.51
8.23
3.40
5.13
1.74
4.98
34.21
11.18
9.80
4.30
5.89
8.04
5.56
5.37
3.03
4.26
4.85
5.21
1.82
4.49
5.54
5.73
May-16
7.20
2.59
8.67
3.53
4.83
2.64
10.77
31.57
13.96
9.72
4.11
5.86
7.82
5.37
5.35
2.94
3.96
4.83
5.10
0.63
4.39
5.85
6.14
WPI
Primary Articles
Fuel & Power
Manufactured Goods
Weights
100.0
20.12
14.91
64.97
May-15
-2.20
-1.05
-9.43
-0.52
Month
Apr-16
0.34
2.34
-4.83
0.71
May-16
0.79
4.55
-6.14
0.91
Average
FY16
-2.49
0.31
-11.67
-1.10
Average
FY15
2.00
2.98
-0.95
2.42
Page 3
1.
2.
3.
4.
Primary Articles
Food Articles
Weights
20.1
14.3
May-15
-1.05
2.74
Month
Apr-16
2.34
4.23
May-16
4.55
7.88
Average
FY16
0.31
3.42
Average
FY15
2.98
6.08
3.99
4.1
4.12
9.19
11.00
7.66
Rice
1.8
-1.43
0.47
2.22
-1.66
6.70
Wheat
1.1
2.60
2.22
3.85
3.67
-0.29
0.7
23.10
36.36
35.56
39.47
5.88
Pulses
3.8
1.40
-0.53
7.66
-1.31
5.35
Milk
3.2
6.89
2.83
2.36
3.28
9.97
2.4
-4.04
3.34
9.75
2.01
2.37
0.6
4.3
13.77
-0.96
12.09
7.12
12.96
4.48
14.64
3.51
21.68
-0.55
0.9
-12.08
5.27
5.60
-3.78
-10.20
1.8
-0.64
5.68
2.73
2.88
3.10
1.4
1.5
7.03
-26.50
6.40
-27.24
4.78
-26.78
8.44
-29.92
0.98
-10.96
Spices
Non-Food Articles
Fibres
Oil Seed
Other Non Food Articles
Minerals
May-15
-9.43
Month
Apr-16
-4.83
May-16
-6.14
Average
FY16
-11.67
Average
FY15
-0.95
Coal
2.1
0.05
0.00
0.00
0.05
-0.51
Mineral Oils
Controlled Fuel :
9.4
-14.18
-7.87
-9.63
-18.30
-2.79
LPG
0.9
-4.95
-1.84
-1.84
-4.11
0.65
Kerosene
0.7
-8.86
-0.27
1.51
-6.27
-6.80
4.7
-9.77
-3.94
-5.01
-16.28
2.49
Fuel Group
1.1
-9.20
-4.18
-10.86
-10.25
-5.44
0.3
-33.41
-20.83
-20.09
-34.22
-12.05
0.1
-34.26
-19.89
-25.81
-34.36
-13.38
Bitumen
0.2
-26.08
-20.69
-22.74
-28.82
-4.95
Furnace Oil
0.5
-30.26
-34.86
-37.08
-41.05
-14.81
Lubricants
0.2
5.15
0.00
0.00
2.11
4.73
3.5
1.73
1.06
1.06
3.74
5.88
Electricity
Average
May-15
-0.52
-0.29
-0.57
4.20
-2.01
5.14
2.61
-0.14
-1.18
4.88
Apr-16
0.71
8.01
-0.75
6.40
-0.36
3.02
1.17
2.03
-0.79
0.56
May-16
0.91
7.54
-0.43
6.36
-0.35
0.25
1.37
1.11
-0.79
1.48
FY16
-1.10
0.77
-1.49
2.86
-1.72
4.21
2.57
-0.13
-1.47
2.60
FY15
2.42
2.41
2.44
7.93
2.62
4.86
5.40
1.33
2.64
3.98
-4.01
0.90
1.40
-4.65
0.15
1.16
-3.31
0.37
1.16
-6.63
0.25
1.33
0.62
2.28
1.28
Month
Weights
Manufactured Goods
65.0
Food Products
10.0
Manufacturing Ex Food
55.0
Beverages & Tobacco
1.8
Textiles
7.3
Wood & Wood Products
0.6
Paper & Paper Products
2.0
Leather & Leather Products
0.8
Chemicals & Chemical Products
12.0
Non-Metallic Mineral Products
2.6
Basic Metals
Machinery & Machine Tools
Transport, Equipment & Parts
10.7
8.9
5.2
Page 4
10
18
12
-5
-6
-10
-12
-15
Food Articles
Apr-16
May-16
Feb-16
Manufactured Goods(LHS)
Mar-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Feb-15
WPI (LHS)
Mar-15
Jan-15
Dec-14
Oct-14
Nov-14
Sep-14
Jul-14
Aug-14
-18
Fuel Group
Apr-16
-3.0
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Feb-16
Dec-15
Oct-15
Aug-15
Jun-15
Apr-15
-2.0
-2.09
-2.08
-1.51
-0.99
-0.75
-0.43
-1.0
28
-0.95
-1.39
-1.92
-1.93
-2.10
-1.98
0.0
-0.57
39.85
38
$/bbl.
1.0
48
-0.38
-0.41
2.0
58
1.43
0.90
0.07
3.0
68
Fuel group
Mineral Oils
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
13.0
6.0
-1.0
-8.0
-15.0
-22.0
-29.0
-36.0
-43.0
-50.0
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
-30.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
$/bl
May-16
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
-30.0
Jan-15
Nov-14
Exhibit 11: Global crude oil price raises domestic mineral oil inflation
Sep-14
Rupee Depreciation(LHS)
Page 5
Pankaj Pandey
Head Research
pankaj.pandey@icicisecurities.com
Page 6
ANALYST CERTIFICATION
We /I, Sachin Jain, CA, and Isha Bansal MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Page 7