Oct inflation up 1.34% on stable food, manufacturing data

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Inflation for the month of October is up 1.34% (provisional) as against -0.17% month-on-month and 11.06% year-on-year. In the fiscal year, inflation build up so far was 6.13% compared to 5.99% in the corresponding period of last year. The government has also revised its August rate to -0.17%. The Wholesale Price Index for all commodities is down 0.2% at 242.2.

 

Inflation internals (MoM)

- Minerals up 3% at 587

- Fuel group up 0.1% at 345

- Primary articles down 0.9% at 273.4

- Manufactured products at 208.5

- Food items down 1% at 278.2

- Non-food items down 1.3% at 236.4

The number has come in as a surprise on stable food and manufacturing data. Prices of daily food articles have been on an uptrend for the past few weeks, so the number was expected to be on the higher side.

 

Sujan Hajra of Anand Rathi Securities was expecting inflation around 2.2%. "Primary food prices are not going up as much as we were expecting earlier and that is basically a very reassuring signal."  Mirdul Sagar, Chief Economist, Kotak Securities, advises caution though. "The fact that manufacturing prices this month has not really firmed up is a bit of a solace. But if you see the latest quarterly results, companies have been giving guidance of cost push coming in. There have been lot of cost push factors which would then be built into manufacturing price rise in the second half. If cost push builds on the manufacturing side, then inflation concerns would remain."

 

So, is a rate hike around the corner? Yes, say both experts. Sagar sees some rate hikes in the next calendar year. "A CRR hike will be somewhere around January and a Repo hike somewhere around April," Hajra added.