CPI inflation likely to be below 4%
Business: Analysts expect retail inflation to be below 4% in July, but attribute this to the effect of a high base in July 2023. Most analysts believe retail inflation as measured by the Consumer Price Index (CPI) will be in the range of 3.3% to 3.7% due to the statistical impact of the base effect, although the relief to consumers as prices fall may not be as obvious. Some expect inflation to be slightly higher, closer to 4%, due to the hike in telecom charges last month. ICRA forecasts CPI inflation at 3.7% in July. “Favourable base effects for food items will push down CPI inflation to around 3.7% in July 2024, despite telecom price hikes, which will push up the print for miscellaneous items. Aditi Nayar, chief economist, head of research and outreach at ICRA, said, “Going forward, as the base effect normalises, CPI prints will start rising again and will peak above 4% between September 2024 and March 2025.
” CPI inflation was 5.08% in June this year and will peak much higher at 7.4% in July 2023.
Retail inflation has been consistently above 4% for several months, driven by high food prices, including cereals, pulses and vegetables. Official data on CPI inflation in July will be released on August 12. “We estimate that CPI inflation slowed to 3.3% year-on-year in July. On a bearish basis, retail prices are expected to rise by 1.1% month-on-month, slightly slower than 1.3% in June,” Barclays said in a recent note on the CPI preview for July 2024. “Food, fuel and core CPI witnessed price acceleration, driven by a seasonal surge in perishables and higher electricity and telecom charges,” it added. It expects food inflation to slow to 4.5% year-on-year in July from 8.4% in June. On a sequential basis, it forecasts a 1.9% month-on-month rise in food CPI. Suman Chowdhury, executive director and chief economist at Acuite Ratings, said the agency expects retail inflation to remain slightly higher at 4.1%. “Reasons for this include higher telecom charges and higher vegetable prices in July in parts of the country.”
