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Retail Inflation Jumps to 6.3% in May; Highest in Last 6 Months

WPI Inflation in food articles eased marginally to 4.31 per cent in May,

WPI Inflation in food articles eased marginally to 4.31 per cent in May,

CPI inflation jumped outside the Reserve Bank of India's inflation targeting range of 4 (+/-2) percent for the first time since November 2020

Retail inflation climbed to 6.30% in May, highest in last three months, according to the official data released by the ministry of statistics and programme implementation (MoSPI) on Monday. The steep increase in inflation data was due a substantial rise in food prices last month. Retail inflation dropped to 4.29% in April. On a monthly basis, the index rose by 1.62%. Consumer Food Price Index increased to 5.01% in May from 1.96% in April, according to the ministry data.

The wholesale price-based inflation accelerated to a record high of 12.94 per cent in May, on rising prices of crude oil and manufactured goods. This is the fifth straight month of uptick seen in the wholesale price index (WPI)-based inflation. WPI has more weightage of non-food commodities.

“Headline CPI-inflation surged to 6.3% YoY in May’21, up from 4.2% a month ago and much higher than the Bloomberg consensus of 5.4%. Core inflation rose from 5.1% in Apr’21 to 82-month high of 6.3% in May’21. Food inflation also increased to 5%. Early in the morning, WPI-inflation came in at 25-year high of 12.9% YoY in May’21 but lower than the market consensus of 13.4%," said Nikhil Gupta, chief economist at Motilal Oswal Financial Services Ltd. “Overall, the broad-based higher-than-expected rise in inflation is concerning. Though it is unlikely to result in any monetary tightening, it rules out any further easing also,” he added.

CPI inflation jumped outside the Reserve Bank of India’s inflation targeting range of 4 (+/-2) percent for the first time since November 2020. “After five months of staying within RBI’s comfort band, the CPI inflation for May 2021 has again shot up above 6%. The surge in inflation has been across all components including, food, fuel and core inflation. For businesses, apart from raw material prices, labour price has also gone up in the last few months due to labour shortage," saoid Rajani Sinha, Chief economist and national director – Research, Knight Frank India.

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Vegetable prices rose 2.6% in May on a monthly basis. Inflation in the pulses category increased 2,3%, compared to April. Fuel and light inflation stood at 2.2% compared to a month ago. Housing inflation reported at 5.3% in May. Health inflation rose to 8.4% in May. Clothing and footwear inflation was at 5.3% last month.

“Food inflation above the 5% mark, edible oil, and pulses have led to relatively high inflation. This has led to the core inflation shooting up to 6.6%. The high inflation is despite renewed lockdown in the month of May and looks largely a supply-side issue. High & sticky inflation is a cause of worry, despite the low industrial capacity utilization," said Nish Bhatt, founder and chief executive, Millwood Kane International - an Investment consulting firm.

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first published:June 14, 2021, 17:59 IST