Wholesale price inflation hit 24 month in August

NEW DELHI: India’s wholesale inflation picked up pace and touched a 24-month high in August, led by costlier manufactured goods, suggesting the return of some pricing power to industry struggling under weak demand.

Inflation, as measured by the Wholesale Price Index, was 3.74% in August compared with 3.55% in July, data released by the Ministry of Commerce and Industry showed on Wednesday.

Prices of manufactured products, with a 64.97% weight in the WPI, increased 2.42% compared with a rise of 1.82% in July.

The government revised wholesale inflation for June to 2.12% from 1.62% earlier. Data released on Monday showed consumer inflation slowed sharply to 5.05% in August from 6.07% the month before.

“Wholesale inflation has undergone a sizable upward revision of 40-50 bps for the last four months, which is a source of some concern,” said ICRA senior economist Aditi Nayar.

The divergent trend of the two indices stems from food inflation, which has a 14.38% weight in WPI and over 45% in CPI. Wholesale inflation in food articles eased to 8.23% in August from 11.82% in July, not enough to offset the rise in manufactured product prices. The data bodes well for the manufacturing sector, which has been struggling to show growth.

“With consumption demand showing signs of improvement and the commodity price cycle bottoming out, it appears that manufacturers are now raising prices, albeit gently, to test the waters,” India Ratings said in a note.