Mint Explainer: Why the latest WPI inflation data is worrisome

livemint.com:

WPI inflation print marked a five-month high, according to data released by the commerce and industry ministry on Thursday. It was at -1.36% in July, -4.12% in June, -3.48% in May and -0.92% in April. A year ago, WPI inflation rate stood at 12.41%.

A Reuters' poll of analysts had estimated a WPI rate of -1.36% for the month. Though fuel and power prices declined in August, the pace was slower than in the previous month, with the contraction rate at 12.79% in July compared to -6.03% in August. In manufactured products, inflation rate was at -2.37% in August compared to -2.51% in July.

Segments/commodities that saw price rise included food products, electrical equipment, computer, electronic and optical products, printing, motor vehicles, trailers and semi-trailers, among others, as per the data. Food inflation remains a concern though. Prices of onion, tomatoes, paddy, pulses and spices continue to trend higher.

Economists expect WPI-based inflation to enter positive territory, due to price rise from September. "With the support of high base fading, some uptick in WPI inflation could be seen in the second half," said Rajani Sinha, chief economist at CareEdge Ratings Ltd. "We could expect WPI inflation to enter the positive territory next month onwards," Sinha said adding that for the full fiscal year (FY24), she expects WPI inflation to average in the range of 1-2%.

Some of the commodity groups that witnessed a decrease in prices are chemical and chemical products, paper and paper products, machinery and equipment, fabricated metal products, pharmaceuticals, medicinal chemical and botanical products; furniture etc. in August, 2023 as compared to July, 2023. Easing vegetable prices saw wholesale food prices fall to 5.62%