Inflation slips to 33-year low

Inflation slips to 33-year low
The Economic Times, August 14, 2009, Page 1 & 7

The annual rate of inflation touched a 33-year low of -1.74% for the week ended August 1, but there was no respite for consumers as poor rains continued to drive up prices of food articles, data released by the ministry of commerce and industry on Thursday showed. The wholesale price index based annual rate of inflation stayed in the negative for the ninth straight week on account of high base effect.

Inflation continues free fall, at 33-yr low
The Economic Times, August 14, 2009,

Our Bureau NEW DELHI

THE inflation rate based on wholesale price index (WPI) fell for the ninth straight week for the week ended August 1, but economists warned it was poised to rise in the months ahead as industrial demand picked up steam and monsoon failure lifted food prices.

The annual rate of inflation fell to a 33-year low of -1.74%, data released by the ministry of commerce and industry showed on Thursday, continuing its trend of the past several weeks and at total variance with the actual inflation experienced by consumers. Consumer price inflation for June stood above 10%.

Kaushal Sampat of Dun & Bradstreet forecast WPI inflation touching 5.8% by the end of the current fiscal year as the base year effect fades away amid increasing commodity prices, rising foodgrain prices caused by delayed monsoon and an expansionary fiscal policy.

The base year effect—inflation had peaked at 12.91% in the corresponding week last year—has continued to depress the headline WPI number in the last eight weeks, although underlying prices have been rising.

The high prices of food items in the retail market don’t get reflected in WPI-based inflation as the segment has only a 15% weightage in the index, which is dominated by manufacturing with a 63% weightage.

Last week, Prime Minister Manmohan Singh had issued the first official warning that emergency measures need to be put in place as the weak southwest monsoon — 25% deficient this year according to the met department — is sure to cut down output from summersown crops that account for half of the country’s food produce.

Data on industrial production released on Wednesday showed a surprise 7.34% jump in factory output in June due to broader recovery in capital goods and consumer durables despite shrinking exports. This, experts believe, will lead to higher demand for raw materials and stoke inflation.