Surprise: WPI Inflation for May 2014 at 6%, Contradicting the Consumer Price Change

Comments Off Written on June 16th, 2014 by
Categories: Inflation

Wholesale Price Inflation for May 2014 came in at 6.01%, up from the 5.20% in April. This is a strange change from Consumer Price Inflation (which actually came in lower than April, at 8.28%)

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On a component basis everything has gone up:

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Strangely, Consumer Price Inflation shows Fuel at a more benign 5.1% while WPI has it at 10.5%. Food, according to the CPI, saw inflation falling from 9.6% in April to 9.3% in May. But in the WPI, it it shows an increase, from 7.1% in April to 8.6% in May.

So this is all a little strange.

And then March data for WPI has been revised upwards from the originally announced +5.7% to +6.0%.

Instantly bond yields went up to 8.65% and the rupee’s at 60.16, both having fallen after the news. WPI isn’t used by the RBI to figure out inflation anymore, but it does have an impact of “real” GDP growth, as the GDP figures use WPI to calculate the inflationary impact on the economy.

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The man behind Capital Mind. Deepak is a co-founder at MarketVision, a financial knowledge company. Deepak also provides data research and consulting services, and now lives in Bangalore. Connect with him at deepakshenoy@gmail.com.