Published: Thu, March 14, 2019
Finance | By Loren Pratt

January IIP, February retail inflation plunge sharply

January IIP, February retail inflation plunge sharply

Lower food prices halved India's retail inflation in February 2019 to 2.57 per cent, from 4.44 per cent during the corresponding month of past year, official data showed on Tuesday. Policy makers will release updated quarterly projections for interest rates as well as inflation, growth and employment when they gather March 19-20.

While retail inflation rose to a four-month high of 2.57 per cent during February, mainly due to higher food prices, it was still well below the RBI benchmark.

The consumer inflation in January stood at 1.97 percent.

"Although inflation has slowed in recent months, it should move gradually higher in the spring and summer", said Gus Faucher, chief economist at PNC Financial Services.

In another set of data released by the Government, industrial production or factory output slipped to 1.7 per cent in January 2019 from 2.4 per cent in December 2018 on account of slowdown in the manufacturing sector.

Excluding the volatile food and energy categories, so-called core prices rose 0.1%, compared with a 0.2% rise in January.

"Consumer price inflation continues to be fairly tame".

On a sub-category basis, vegetable prices reduced on YoY basis in January by (-) 7.69 per cent.

Additionally, among the six use-based classification groups, the output of primary goods, which has the highest weightage of 34.04, rose by just 1.4 per cent. That index tends to run slightly below the Labour Department's CPI, and January figures are due March 29.

Shelter costs, which account for about a third of CPI and mainly include housing expenses, continued to hold up, with the fourth straight monthly increase of 0.3 per cent. Owners-equivalent rent, one of the categories created to track rental prices, rose 0.3 per cent, as did rent of primary residence.

USA 30-year bond yields were slightly down at 3.031 percent, from 3.032 percent on Monday. This marks the strongest inflation-adjusted wage growth since November 2015, an increase that would likely help consumer spending and economic growth. The central bank also changed its policy stance to "neutral" from "calibrated tightening".

A New York Fed survey of consumer expectations published on Monday showed a drop in inflation expectations in February. Some might point to a softer core reading as a sign that pressures are ebbing, but a couple of the price declines look temporary, and we are not going to read too much into one-month's reading.

Prices for new motor vehicles, used cars and trucks, as well as recreation fell.

But consumers got some relief from healthcare costs, which fell 0.2 percent after five straight monthly increases.

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