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Thursday, September 03, 2009

Inflation at -0.21%

At the edge of positive territory

The annual rate of inflation, calculated on point-to-point basis, stood at -0.21% for the week ended 22 August 2009 as compared to -0.95% for the previous week and 12.76% during the corresponding week of the previous year. Build up of inflation in the current financial year so far was 5.29% compared to a build up of 6.40% in the corresponding period of the previous year. 52-week average inflation for the week ended 22nd August, 2009 was 3.9%.

The index for primary articles with 22.02% weight in WPI rose by 0.7% to 270.4 from 268.4 for the previous week. The three major contributors of the primary article index moved upward from the previous week level. The index for food articles group rose by 0.9 % to 272.8 from 270.3 % for the previous week due to higher prices of fruits and vegetables (4%), jowar, urad and bajra (3% each), maize and arhar (2% each) and moong and tea (1% each).

The index for non-food articles group rose by 0.3% to 241.0 from 240.3 for the previous week due to higher prices of sunflower (3%), raw silk (2%) and groundnut seed, castor seed and raw rubber (1% each). The index for minerals group also rose by 0.5 % to 564.4 from 561.7 for the previous week due to higher prices of barytes (34%) and iron ore (1%).

The index for fuel, power, light and lubricant with 14.23% weight rose by 1.5 % to 343.3 from 338.2 for the previous week due to higher prices of aviation turbine fuel and electricity (5% each) and furnace oil (1%).

The major driver of WPI that is manufacturing product with 6.75% weight rose by 0.5 percent to 207.5 from 206.4 for the previous week. The index for food products group rose by 3.1% to 241.5 from 234.2 for the previous week due to higher prices of rice bran oil (8%), sugar (7%), oil cakes (5%), imported edible oil (4%) and butter and ghee (1% each). The index for basic metals alloys and metal products group rose by 0.2% to 255.6 from 255.2 for the previous week due to higher prices of zinc (4%), pipes & tubes, foundry pig iron and basic pig iron (2% each) and steel sheets, plates and strips (1%).

On a flip side the index for textiles group declined by 0.3 % to 143.2 from 143.6 for the previous week due to lower prices of texturised yarn and hessian cloth (3% each) and hessian and sacking bags (1%). The index for chemicals and chemical products group declined by 0.7 % to 226.4 from 228.0 for the previous week due to lower prices of ammonium sulphate n_content. The index for non-metallic mineral products group declined by 0.4 % to 225.0 from 225.9 for the previous week due to lower prices of cement (1%).

The week on week acceleration in WPI index hint for the underlined inflationary pressure. The rising food prices and lower rainfall generates uncertainty for food prices. The WPI recorded 1.74% fall for the week ended 1 August 2009, which moved up to 0.95% decline for week ended 15 August 2009. The 0.6% growth in WPI for week ended 22 August 2009 signals that inflation is hovering at the edge of positive territory.

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