We continue to expect average CPI inflation to print at 5.5% - Acuite Macro Pulse November 2021

Annualized inflation, on both retail and wholesale indices, rose in the month of Oct-21. The upside was however modest as a favorable base at play masked the strong sequential momentum in prices on both the metrics. To put this in perspective -

• CPI inflation rose to 4.48% YoY from 4.35% in Sep-21, despite a strong 1.4% MoM jump in prices. The headline inflation remains well within the RBI's policy target band for the fourth consecutive month, continuing to offer comfort.

Key highlights: Oct-21 CPI Inflation

• The sequential momentum was broad-based in Oct-21, with every sub-category witnessing a pick-up vis-à-vis Sep-21.
• Bulk of the momentum was driven by food prices, which rose by a sharp 2.3% MoM. A combination of excessive rainfall in Sep-21 (which weighed on standing crop yields along with a late withdrawal in Oct-21), festive season demand upside and higher fuel and transport costs appear to have played a role. At a granular level, price pressures were led by Vegetables, Sugar & Confectionery and Oils & Fats. On annualized basis, however, food inflation remained largely subdued at 1.82% vs. 1.61% in Sep-21 owing to a favorable base (Oct-20 had too seen a spike in food index).
• Fuel price momentum increased to 0.98% MoM vs. 0.74% in Sep-21, led by Diesel, Kerosene, Coal, LPG, and Firewood prices. On annualized basis, fuel inflation remained at a series high of 14.35% reflective of an adverse base, higher domestic taxes, and the run up in global crude oil prices.

WPI inflation soared to a 5-month high of 12.54% YoY in Oct-21 from 10.66% in Sep-21, on the back of a broad-based increase. On sequential basis, the index jumped up by 2.3% MoM - the fastest pace of monthly increase on record.

Read more about inflation here: Link to the report

Source : Equity Bulls

Keywords

Inflation AcuiteRatings CPIInflation MacroPulse