Inflation falls to 4.4 per cent, factory growth rises

Inflation falls to 4.4 per cent, factory growth rises

Inflation falls to 4.4 per cent, factory growth rises

Equity markets had opened higher after the U.S. Labor Department announced its Consumer Price Index rose 0.2 percent in February. In the 12 months through February, the CPI rose 2.2 percent, up from 2.1 percent in January as the flat reading from past year dropped from the calculation.

Food inflation, as measured by Consumer Food Price Index, rose to 4.96 per cent in December from 4.35 per cent the previous month.

Excluding food and fuel prices, which can see big swings, the index also gained 0.2 per cent for the month, with noted gains in the prices for auto insurance, rent and apparel. January's surge in inflation cemented investors' expectation of an interest rate hike in March and increased the possibility of a fourth hike in 2018.

Inflation in pulses and spices witnessed fall in price rise. However, the mining sector saw a flat growth of 0.1 per cent compared to 8.6 per cent a year ago.In terms of industries, 16 out of 23 industry groups in the manufacturing sector showed positive growth during the first month this year. Food price inflation was at 4.7% in January.

Gas prices and the cost of hospital services declined, but apparel prices and vehicle insurance rates spiked, which ticked the overall rate higher, Bank of Montreal economist Robert Kavcic noted.

February inflation fell to a 4-month low of 4.44 per cent - still above the RBI's target of 4 per cent - on cheaper food articles and lower cost for fuel.

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One month ago, reports about an unexpectedly sharp rise in United States consumer prices shocked the markets.

Chart 1 shows the inflation rate and our forecast for February 2018.

While the price rise in food segment was 3.26% in February, it was 17.57% in vegetables. Here though, the 12-month pace should pick up to 2.5% year over year from 2.2%.

The energy price index inched up by 0.1% in February after jumping by 3.0% in January, while food prices were unchanged. Price increases have largely remained below that goal in recent years. The higher than expected rate was driven largely by the increase in the cost of food items, which shot up by 0.87% Month-on-Month.

Industrial activity accelerated in January to 7.5% on the back of strong manufacturing growth and a rebound in the consumer durables sector, according to official data released on Monday. Even at the use based classification the growth is broad based as with the exception of intermediate goods all other segments have shown growth either in high single digit or greater than high single digit.

But, on a cumulative basis, the IIP expanded by 4.1 per cent between April and January 2017-18, which was lower than the 5 per cent growth in the same period a year ago.

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