By Ruma Dubey

The bad news first – retail inflation or Consumer Price Index (CPI) for the month of May rose to a four month high at 4.87% v/s 4.58% in April. This comes close on the heels of RBI hiking interest rates last week precisely to control inflation. RBI had raised its inflation target upwards while keeping growth targets status quo. Looks like as per RBI, CPI will remain elevated in the first half of the current fiscal – its target is 4.8 to 4.9%.

The inflation internals: (MoM)

• Food inflation at 3.1% v/s 2.8%
• Fuel and light at 5.8% v/s 5.2%
• Clothing and footwear at 5.47% v/s 5.1%
• Housing at 8.4% v/s 8.5%

As we can see, the prices are up almost all across the board, except for housing, which is obviously down due to low demand.

And now that we have digested the bad, the good news – IIP for April showed a marginal growth at 4.9% v/s 4.4% (MoM). This shows that from March onwards, growth remains moderated and far away from the Nov-Feb growth of over 7%.

The real push came from the manufacturing sector which grew at 5.2% v/s 4.4% (MoM) and to some extent, it was also led by mining, which should a smart jump in growth from 2.8% to 5.1%. Consumer durables also did well at 4.3% v/s 2.9% and non-durables dropped from 10.9% to 7% - this is surprising given the growth in auto sector and also the benefit of a lower base effect. Electricity also showed degrowth at 2.1% from 5.9%.

In terms of industries, sixteen out of the twenty three industry groups in the manufacturing sector have shown positive growth during the month of April 2018 as compared to the corresponding month of the previous year. The industry group ‘Manufacture of computer, electronic and optical products’ has shown the highest positive growth of 27.5 percent followed by 21.9 percent in ‘Manufacture of motor vehicles, trailers and semi-trailers’ and 15.7 percent in ‘Manufacture of food products’. On the other hand, the industry group ‘Other manufacturing’ has shown the highest negative growth of (-) 30.7 percent followed by (-) 13.4 percent in ‘Manufacture of wearing apparel’ and (-) 10.3 percent in ‘Printing and reproduction of recorded media’.

Some important item groups showing high positive growth during the current month over the same month in previous year include ‘Sugar’ (156.5%), ‘Construction machine/ equipment (incl. bull-dozers and road rollers)’ (110.4%), ‘Stainless steel utensils’ (101.7%), ‘Commercial Vehicles’ (94.3%), ‘Printed Circuit Boards (whether or not mounted with IC chips /components)’ (69.3%), ‘Steroids and hormonal preparations (including anti-fungal preparations)’ (45.8%), ‘Transformers (Small)’ (45.1%) and ‘Polymers (incl. Polyethylene, PVC, Poly propylene)’ (26.2%).

Some important item groups that have registered high negative growth include ‘Jewellery of gold (studded with stones or not)’ [(-) 75.1%], ‘Antimalarial drugs’ [(-) 65.9%], ‘Air filters’ [(-) 52.2%], ‘Copper bars, rods & wire rods’ [(-) 40.9%], ‘Telephones and mobile instruments’ [(-) 38.4%], ‘Paper of all kinds excluding newsprint’ [(-) 37.8%], ‘Bags/ pouches of HDPE/ LDPE (plastic)’ [(-) 37.6%], ‘Copper electrodes’ [(-) 34.1%], ‘Plastic components of packing/ closing/ bottling articles & of electrical fittings’ [(-) 30.0%], ‘Separators including decanter centrifuge’ [(-)25.8%], ‘Pesticides-technical grade’ [(-) 24.9%] and ‘Readymade Garments, knitted’ [(-) 20.6%].

Well, tomorrow, the market will focus more on the higher inflation and that could make the moods somber. And then again, we wait the Fed Reserve meet tomorrow and all eyes will be on whether rates are hiked and action is taken to shrink the balance sheet, which our RBI Governor has warned would not be good for the emerging markets if not done in a staggered manner. So the eyes will move from IIP and CPI to Fed…. Yeah, we indeed live in a global world!