WPI contraction eases in Dec at -0.73% YoY; food prices up

Moneycontrol BureauWholesale inflation, as measured by the wholesale price index (WPI), remained in the negative territory for the 14th straight month but the intensity of the contraction eased, with December WPI coming in at -0.73 percent YoY, versus -1.99 percent.A CNBC-TV18 poll had forecast WPI to come in at -1.07 percent.Analysts said a large part of the ease in contraction was driven by the base effect wearing off but expressed worry about the rise in prices of food products. Disinflationary pressures for manufacturing products continued, outlining the weakness in the commodities sector.Among sub groups, primary articles (basket weightage: 20.12 percent) rose 5.48 percent versus 2.27 percent, fuel & power group (weightage: 14.91 percent) fell 9.15 percent versus a fall in 11.09 percent in November while manufactured products (weight: 64.97 percent) stood at -1.36 percent versus -1.42 percent."The deflation is gradually declining since September partly because the base effect has gone away and also because global commodity prices are getting normalised and the pace of deflation in manufactured product prices is also coming down," Rupa Rege-Nitsure, Chief Economist, L&T Finance Holdings told CNBC-TV18.She said that it was good that the gap between the CPI and WPI numbers was narrowing, something she said would allow policymakers "take rational decisions"."As far as non-food category is concerned I think there is still weakness. That weakness might continue for some more time unless we see swift pick in demand which I think doesn’t seem to be the case as of now," CRISIL Chief Economist DK Joshi told CNBC-TV18. "[But] food will remain a bit of a concern in the coming month."Both economists said they expect the RBI to ease interest rates by 25 basis points after the Budget but added that would be all for the year.