Archive for August, 2010

Food Inflation – the “Primary Articles” part of the WPI – is quietly inching downwards, at 14.85%.

Click for larger images.

While inflation looks like it’s moderating, what’s really happening is that past data is being revised constantly, and these revisions have thrown the inflation numbers earlier.

The most recent revision is for that of 12th June (2 months earlier) which has pushed up the Inflation figure then to a whopping 19.79%, from an earlier reported 17.60%.

I’ve spoken about the dangerous revisions earlier:

A major concern now is how this data is being corrected. Usually after two weeks a preliminary figure is quoted, and that is corrected after two months. The last weeks have seen tremendous upward corrections. For the week ended May 1, primary articles (food) inflation was announced as 16.44%, but it has now been corrected to 18.64%. (Get Data Here)

Here’s how it goes.

I don’t have access to data before 18/5 right now (the press releases are not archived), so can’t chart prior revisions.

From the monthly inflation release desk, the WPI goes down to 9.97% from last month’s headline number of 10.55%.

What’s scary? Like last month, the May numbers are revised to show inflation of 11.14% versus the 10.16% that was earlier reported. We might be seeing the current number too revised higher, in about three months.

The fuel price hike in June was 10%, and reflected in 3.2% month on month increase in the fuel index.

What happens now? Will inflation be the party pooper? Inflation continues to stay high despite the “low base effect” – we are now in uncharted territory in terms of the Wholesale Price Index, and the graph shows a steady, steep rise. If they have to use interest rates to control this inflation, it might need rates to go to 10% or 12% (you have to overcompensate). A double dip recession in the west might change things somewhat, though, but that stuff can take many months to reflect in our economic data.