CPI inflation in July may have eased to less than 4%
Due to statistical impact of higher base; vegetable prices remained expensive, telecom tariff hiked in July.
- Aug 9, 2024,
- Updated Aug 9, 2024 5:32 PM IST
Retail inflation in July could have eased to less than 4%, analysts estimate, but attribute this to the impact of a higher base in July 2023. Most analysts believe that retail inflation as measured by the consumer price index (CPI) would be in the range of 3.3% to 3.7% due to the statistical impact of the base effect, although a reprieve to consumers in the form of a drop in prices may not have been evident. Some expect inflation to be slightly higher at close to 4% due to the hike in telecom tariffs last month.
ICRA has forecast CPI inflation at 3.7% in July. “A favourable base effect for food items would compress the CPI inflation to around 3.7% in July 2024, in spite of the telecom price hikes, which would push up the print for miscellaneous items. Going ahead, as the base effect normalises, the CPI prints will start rising again and exceed 4% between September 2024 and March 2025,” said Aditi Nayar, Chief Economist, Head of Research and Outreach at ICRA.
CPI inflation was at 5.08% in June this year and was much higher at 7.4% in July 2023. Retail inflation has been persistently high at over 4% for several months, driven by high food prices, including those of cereals, pulses and vegetables. Official data on CPI inflation in July will be released on August 12.
“We estimate that CPI inflation slowed to 3.3% year on year in July. The moderation is driven by base effects,” said Barclays in a recent note on CPI Preview for July 2024. On a sequential basis, retail prices likely rose 1.1% month on month, slightly slower than 1.3% in June, it said. “Upward momentum in prices was visible across food, fuel and core CPI, in part led by a seasonal uptick in perishable food items, and electricity and telecom tariff hikes,” it further said.
It expects food inflation to slow to 4.5% year on year in July from 8.4% in June. On a sequential basis, it forecast food CPI rose by 1.9% month on month.
Suman Chowdhury, Executive Director and Chief Economist, Acuite Ratings said the agency expects retail inflation to be slightly higher at 4.1%. “The reasons include the higher telecom tariffs and higher prices of vegetables in July in some parts of the country.”
The Reserve Bank of India has projected CPI inflation at 4.5% in the fiscal 2024-25 with Q2 at 4.4%; Q3 at 4.7%; and Q4 at 4.3%. “Headline inflation has moderated from its peak but unevenly. Looking ahead, food price momentum has remained elevated in July. In Q2:2024-25, though favourable base effects are large, the sharper uptick in price momentum relative to earlier expectations is likely to result in a shallower softening of CPI headline inflation,” said the Monetary Policy Committee in its statement after its meeting from August 6 to 8. Inflation is expected to edge up in Q3 as favourable base effects taper off, it further said.
Retail inflation in July could have eased to less than 4%, analysts estimate, but attribute this to the impact of a higher base in July 2023. Most analysts believe that retail inflation as measured by the consumer price index (CPI) would be in the range of 3.3% to 3.7% due to the statistical impact of the base effect, although a reprieve to consumers in the form of a drop in prices may not have been evident. Some expect inflation to be slightly higher at close to 4% due to the hike in telecom tariffs last month.
ICRA has forecast CPI inflation at 3.7% in July. “A favourable base effect for food items would compress the CPI inflation to around 3.7% in July 2024, in spite of the telecom price hikes, which would push up the print for miscellaneous items. Going ahead, as the base effect normalises, the CPI prints will start rising again and exceed 4% between September 2024 and March 2025,” said Aditi Nayar, Chief Economist, Head of Research and Outreach at ICRA.
CPI inflation was at 5.08% in June this year and was much higher at 7.4% in July 2023. Retail inflation has been persistently high at over 4% for several months, driven by high food prices, including those of cereals, pulses and vegetables. Official data on CPI inflation in July will be released on August 12.
“We estimate that CPI inflation slowed to 3.3% year on year in July. The moderation is driven by base effects,” said Barclays in a recent note on CPI Preview for July 2024. On a sequential basis, retail prices likely rose 1.1% month on month, slightly slower than 1.3% in June, it said. “Upward momentum in prices was visible across food, fuel and core CPI, in part led by a seasonal uptick in perishable food items, and electricity and telecom tariff hikes,” it further said.
It expects food inflation to slow to 4.5% year on year in July from 8.4% in June. On a sequential basis, it forecast food CPI rose by 1.9% month on month.
Suman Chowdhury, Executive Director and Chief Economist, Acuite Ratings said the agency expects retail inflation to be slightly higher at 4.1%. “The reasons include the higher telecom tariffs and higher prices of vegetables in July in some parts of the country.”
The Reserve Bank of India has projected CPI inflation at 4.5% in the fiscal 2024-25 with Q2 at 4.4%; Q3 at 4.7%; and Q4 at 4.3%. “Headline inflation has moderated from its peak but unevenly. Looking ahead, food price momentum has remained elevated in July. In Q2:2024-25, though favourable base effects are large, the sharper uptick in price momentum relative to earlier expectations is likely to result in a shallower softening of CPI headline inflation,” said the Monetary Policy Committee in its statement after its meeting from August 6 to 8. Inflation is expected to edge up in Q3 as favourable base effects taper off, it further said.