WPI inflation shot up to 5.25% in Jan

Posted February 15, 2017

But a pick-up in global crude prices, a volatile foreign exchange market, and relatively high domestic non-food and non-fuel inflation have fuelled concerns among RBI officials. Thus, not only was the acceleration entirely supply-push, led by higher commodity prices, rather than demand-pull, but it also suggests rising pressure on profit margins.

"But the honeymoon of rock-bottom price rises is now over with inflation having doubled since October, and set to increase further in the coming months".

WPI inflation stood at 3.39 per cent in December previous year while it was at -1.07 per cent in January 2016.

Wholesale price inflation scaled a 30-month high of 5.25% in January, thanks primarily to a favorable base effect and as elevated core and fuel inflation more than offset deflationary pressure in primary food articles induced by demonetisation. That was actually a smaller rise than economists polled before the release expected.

This is the lowest level of inflation rate recorded since the new CPI series was launched in January 2014.

According to the wholesale price index (WPI) data released by the commerce and industry ministry, the annual inflation rate of inflation was (-) 1.07 per cent in January 2016.

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Earlier this month, the Bank of England said it expected the inflation rate would hit 2.7% next year.

However, even if headline inflation missed forecasts this time, the data still confirm that consumer prices are rising rapidly in the U.K. At 1.8% last month, inflation is now at the highest level since June 2014 and firmly above the 0.3% printed in January previous year.

Economist Victoria Clarke said the shortage of vegetables after extreme weather ravaged crops across Europe might have also pushed up prices at the supermarket checkout.

Rising fuel and food prices were seen as the main drivers. The WPI for January'17 is significantly higher than the WPI of (-) 1.07% for the corresponding month a year ago.

"The rising inflationary pressures in the United Kingdom are somewhat worrisome as the inflation almost approaches the Bank of England's (BoE) two per cent target in January", said Ipek Ozkardeskaya, senior market analyst at London Capital Group.

The inflation rate for the "machinery and machine tools" group declined by 0.1 per cent due to lower prices of machine tools, pump and assembly and fibre optic cable.