Measure of retail price gains at 4.87% for May, lifted by accelerating food and fuel costs as oil climbs
Retail inflation accelerated to a four-month high in May as quickening food and fuel costs lifted the Consumer Price Index (CPI) based reading to 4.87%, official data released on Tuesday showed.
The acceleration in price gains in May, a second straight month when the headline reading has risen, followed April’s 4.58% pace.
The food and beverages segment saw inflation accelerating to 3.37% in May, from 3% in April, while inflation in the fuel and light segment at 5.8%, compared with 5.16% in the previous month.
“Retail inflation took another leap on anticipated lines and realised RBI fears of a further upswing, basis which the key policy rate was hiked by 25 basis points in the latest monetary policy meet,” Anis Chakravarty, Lead Economist and Partner at Deloitte India, wrote in a note.
“Pass through of fuel prices largely led to surge in inflation while core inflation added to pricing pressures with broad based movement recorded across miscellaneous category, especially across travel expenses, education, and health.”
The overall miscellaneous segment in the CPI saw inflation quickening to 5.35% in May, from 4.96% in April.
Monsoon rains crucial
“Food prices also showed some increase… especially fruits and vegetables,” Mr. Chakravarty wrote. “However, they can be expected to stabilise on monsoon cues while core inflation can be expected to see further expansion if input costs remain on elevated levels.”
Oil prices are also expected to remain elevated for some time, which will continue exerting upward pressure on inflation, he added.
“In the immediate future, oil prices are expected to move between $80-85 a barrel,” D.K. Srivastava, Chief Policy Advisor at EY India, said. “So, they will be under pressure for at least one quarter, and this will have an effect. Food inflation is seasonality bound. Once the rains start, vegetable prices will come down and I would expect this inflation to moderate from mid-July onwards.”
Inflation in the pan, tobacco and intoxicants category quickened marginally to 8% in May, from 7.91% in April.
The clothing and footwear segment saw inflation accelerating to 5.47%, from 5.11% in the preceding month.
Housing was the sole category where inflation reflected a deceleration, albeit marginally, from April’s 8.5% pace to 8.4% in May.