Rating agency India Ratings (Ind-Ra) on Thursday said that the latest Index of Industrial Production (IIP) and consumer price index (CPI) data indicate that the challenges for the economy are still very much intact. A second consecutive decrease in food costs held it below the median forecast of 82 economists surveyed by Bloomberg, which called for a 0.3 percent advance. That lifted the year-on-year core CPI gain to 2.3 per cent from 2.2 per cent in May. Medical care costs increased 0.4 per cent after advancing 0.3 per cent in May.
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It said the compelling reason for an August 9 RBI rate cut is that a good monsoon should douse agflation (agriculture driven inflation) – a 5 per cent change in food prices swings CPI inflation by 250 basis points.
The year-on-year increase is below the 1.7 per cent average annual increase over the last 10 years.
Excluding food and energy, so-called core consumer prices also rose 0.2% in June.
Prices increased 1 percent in the 12 months ended in June, the same as in the prior month. Concerns about persistently low inflation contributed to the US central bank keeping interest rates unchanged last month.
Energy costs increased 1.3 percent from a month earlier, the report showed.
The cost for services excluding rents climbed just 0.1 percent in June, the smallest gain since January.
This Year-on-Year price surge was primarily due to the increasing prices seen in the eight groups – “Education” by 7.1 percent; “Recreation and Culture” by 5.2 percent; “Housing, Water, Electricity and other Fuel” by 4.8 percent; “Transport” by 2.6 percent; “Miscellaneous Goods and Services” by 2.4 percent; “Clothing and Footwear” by 1.9 percent; “Furniture and Household Equipment” by 0.6 percent; and “Communication” by 0.1 percent.
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The Fed’s preferred gauge of inflation, which is the Commerce Department’s personal consumption expenditures measure, hasn’t matched the central bank’s 2 percent goal since April 2012. Hourly earnings adjusted for inflation fell 0.2 percent from the prior month. In the 12 months through June, the CPI advanced 1.0 per cent, matching May’s increase.
