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Economy First Cut: Headline inflation eases to 11-month low in November 2010

14th December 2010

Inflation moderates on an annual basis due to base effect


ƒ Headline inflation based on WPI moderated to 7.5 per
%

WPI yoy SA mom


12.0 cent in November 2010 as compared to 8.6 per cent and
8.9 per cent (revised) in October 2010 and September
8.0 2010 respectively.
5.9 7.5
ƒ The deceleration in headline inflation on year -on-year
4.0 basis happened due to both base effect and softening of
prices across all the major categories. However, on a
0.0 month-on-month seasonally-adjusted basis inflation
accelerated by 0.7 per cent.

-4.0
Mar-09

May-09

Mar-10

May-10
Jan-09

Sep-09

Nov-09

Jan-10

Sep-10

Nov-10
Jul-09

Jul-10

Inflation in major groups


Apr-Nov ƒ Primary articles inflation slipped to a 1-year low of 13 per
(2004-05 base) Weight Nov-09 Sep-10 Oct-10 Nov-10 FY10 FY11 cent in November 2010 as primary food inflation slipped
General 100.0 4.5 8.9 8.6 7.5 1.0 9.4
to single-digits after a gap of 17 months.
Primary 20.1 14.3 18.2 16.7 13.0 8.8 18.0
ƒ Non-food primary article inflation too decelerated in
- Food articles 14.3 16.7 16.3 14.1 9.4 12.5 16.8
- Non-Food articles 4.3 4.9 20.8 22.2 19.2 1.1 17.7 November 2010.
- Minerals 1.5 14.9 26.8 25.4 21.7 -0.5 26.3
Fuel 14.9 -1.1 11.1 11.0 10.3 -7.0 12.5 ƒ Fuel inflation in November 2010 eased to 10.3 per cent as
- Petrol 1.1 -11.9 15.4 16.6 18.2 -13.0 16.1 compared to 11.0 per cent in the previous month.
- Diesel 4.7 -5.8 14.6 14.6 14.7 -5.9 14.9
Manufacturing 64.9 2.3 4.8 4.7 4.6 0.4 5.4
- Food 9.9 17.9 3.6 3.0 0.6 11.3 5.1
- Non-food 55.0 -0.5 5.1 5.1 5.4 -1.6 5.4

Food inflation slips to single-digits after 17 months


ƒ Manufacturing inflation softened marginally to 4.6 per cent
%

Non-Food Mfing Food (Prim+Mfing)


25.0 in November 2010.
20.0
ƒ However, core (non-food manufacturing) inflation
15.0 12.1 accelerated for the 2nd consecutive month.
10.0
6.1
5.0 3.2
ƒ Overall food inflation (primary + manufacturing) eased to
5.4
single-digits in November 2010 due to kharif foodgrains
0.0 and winter vegetables hitting the market.
-5.0
Mar-09

May-09

Mar-10

May-10
Jan-09

Sep-09

Sep-10
Nov-09

Jan-10

Nov-10
Jul-09

Jul-10

Note: Graph depicts y-o-y growth


Source: Ministry of Industry, CRISIL computations

Outlook
Moderation in headline inflation for November 2010 is as per expectations. Going forward, high base along with good kharif harvests will
further ease inflation. Therefore, we expect annual average inflation to settle in the range of 8.0-8.5 per cent for FY11, with March-end
FY11 number coming in at around 6 per cent.
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