WPI also falls, in sync with the CPI inflation: Angel Broking

Views of Mr. Jaikishan J Parmar (Research Analyst, Angel Broking):

"Wholesale Price Inflation (WPI) for the month of February 2018 came in lower at 2.48% compared to 2.84% in the month of Jan 2018. In fact, the cumulative WPI inflation rate for the first 11 months of the year is at 2.30%, sharply lower than the 4.92% WPI inflation reported in the same period last year.

Primary articles consisting of crops and mining products saw negative inflation of -1.3% in February and with a weightage of 22.62%, the primary articles did have a strong influence on keeping WPI inflation down. Fuel and power, with a weightage of 13.15% actually saw positive inflation of 1.2% in tune with rising crude oil prices. The biggest segment, manufacturing which accounts for 64.23% saw producer inflation rate of just 0.4% in February. In fact most of the sub-segments of the manufacturing sector apart from the Chemicals industry actually saw flat to negative WPI inflation.

The weakening of WPI inflation is not a very positive sign from the point of view of manufacturers as it indicates the lack of pricing power for manufacturers. That trend is visible in the weakening PMI manufacturing and PMI services where the weakening pricing power is quite visible. This is a factor that may sober the positive impact of growth in GDP."

Source : Equity Bulls

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