Key Takeaways
Highlights: After a consistent decline over the past four months, the Consumer Price Index (CPI) experienced a rise
Reasons for the Rise in Inflation:
- The rise in inflation can be attributed to two main factors. Firstly, the increase was in the food group and the miscellaneous group. The food group, which holds a significant weight of approximately 40% in the Consumer Price Index (CPI), experienced a price surge. Comparing year-on-year data, inflation in June 2023 reached 4.6%, marking an increase from the previous month’s 3.3%.
- Additionally, in June 2022, the consumer price indices showed moderation, creating a lower base for comparison. As a result, this lower base has translated into higher year-on-year growth in the Consumer Price Index (CPI), increasing inflation.
The potential risks to the current outlook include:
- Distribution of rainfall
- Geopolitical tensions
- Rise in oil prices
Outlook
Though it may remain in the RBI’s upper tolerance limit, in the coming months, two factors could exert upward pressure on inflation. Firstly, the continuation of rising prices for goods and services may contribute to the overall increase in inflation. Secondly, as the base effect gradually diminishes, the previous lower base for comparison will wear off, potentially resulting in higher year-on-year inflation figures. These combined factors suggest a possibility of ongoing inflationary pressure soon.
June CPI Highlights
Highlights: Core inflation experiencing a gradual easing
- After experiencing four months of easing, the Consumer Price Index (CPI) increased. In June 2023, the CPI rose to 4.8%, compared to 4.3% in May 2023.
- In June 2023, food inflation increased to 4.6% from 3.4% in May 2023. This rise in food inflation is a significant concern for future inflation trends. Specifically, on a sequential basis, vegetable inflation reached 12%, which stands out as the highest among other food categories.
- Core inflation, excluding the food, fuel & light group, has been experiencing a gradual easing since February 2023. This comes after a persistent upward trend in core inflation following the pandemic. The easing of core inflation suggests a potential stabilization in overall inflationary pressures.
CPI: Groupwise
Highlights: Except for Foods & Beverages and Miscellaneous, other groups have seen price softening
Sub-group: Food & Beverage
Highlights: Vegetables stand out as the highest among other food categories.
