Acuité Ratings & Research comments on WPI - Aug'22

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research

"Despite the firmness in the retail inflation levels, the WPI inflation print continues to subside gradually and stood at 10.70% YoY in Sep-22 from 12.41% YoY in Aug-22. The wholesale price index has been in a contraction mode for the last three months primarily due to the moderation in commodity prices. The share of food on a consolidated basis in WPI stands much lower at 24.3% as compared to 45.9% weightage in the CPI construct. Therefore, the impact of higher food prices continues to be modest in the WPI trajectory with inflation in food articles at 0.28% only on a sequential basis.

What is driving the downward trajectory in the WPI inflation is the moderation in the fuel prices and the sequential contraction in manufactured products inflation though it is partly offset by the increase in power tariff in some regions. This reflects the limited ability of producers to pass through higher input costs in the context of the global slowdown and the increase in interest rates. Core WPI print has accordingly, dropped from 7.9% in the previous month to 7.0% in Sep-22.

We expect the WPI trajectory to moderate further given the slowdown in the overall recovery momentum and the weaker outlook on commodity prices. Over the next few months, the headline retail inflation is likely to start mirroring such a trend but that process may be gradual given the uptick in supply-driven food inflation."

Source : Equity Bulls

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WPI August2022 AcuiteRatingsandResearch