July retail inflation softens to 3.15 per cent
Retail inflation in July softened a bit to 3.15 per cent from 3.18 per cent in June, and 4.17 per cent year ago on lower fuel prices.
According to the National Statistical Office (NSO) data, the consumer food price index (CFPI) increased 2.36 per cent in July against 2.25 per cent in June and 1.30 per cent in July 2018.
Among the non-food categories, the fuel and light segment's inflation declined year-on-year to (-) 0.36 per cent in July.
Prices of vegetables, eggs, meat and fish pushed the retail inflation up year-on-year. Vegetables' prices increased 2.82 per cent, meat and fish 9.05 per cent, eggs 0.57 per cent and pulses and its products 6.82 per cent.
However, at (-) 2.11 per cent decline in prices of 'sugar and confectionery' capped the food inflation.
Prices of milk-based products rose 0.98 per cent, cereals and its products 1.31 per cent. The food and beverages sub-category recorded 2.33 per cent rise in the month over July 2018.
The marginal dip in the CPI inflation in July was led by fuel and light, which recorded a disinflation, even as food and core inflation inched up, said Icra's Principal Economist Aditi Nayar.
"The incoming trends in food prices need to be cautiously watched following the recent flood in some states, rising vegetable prices and continued lag in kharif sowing. Moreover, unfavourable base effect is likely to contribute to hardening of food inflation in the ongoing quarter," Nayar said.
"At present, we expect the CPI inflation to inch up in the next two months, while remaining below the MPC target of 4 per cent in Q2FY20. The CPI inflation trajectory may allow for a 15 bps rate cut in October, after monsoon related uncertainties get resolved, especially if crude oil and other commodity prices remain relatively soft," Nayar said.
According to Madhavi Arora, Economist, Edelweiss Securities, "The uptick in July was backed by sequential uptick in food components, led by fruits and vegetable. The core inflation also increased sequentially after contracting the previous month, led by education and housing."
"We think the food inflation seasonal uptrend will likely continue in the near-term, especially with uneven monsoon and possible flood disruption."
Joseph Thomas, Emkay Wealth Management head of research, said, "Retail inflation remains subdued with most components indicating not much variation compared with the earlier periods."
"But we need to make allowance for factors, like cheaper rupee, loss of crops due to rains and the consequent effects on prices, while trying to judge the future inflation," Thomas said.
