Consumer prices rose 0.2% in February

Daniel Fowler
March 14, 2019

Lower food prices eased India's February 2019 retail inflation to 2.57 per cent, while a sharp decline in manufacturing output slowed industrial production in January to 1.7 per cent, official data showed on Tuesday. The Reserve Bank of India (RBI) factors in retail inflation while deciding at its monetary policy.

Excluding food and energy, the so-called core consumer price index rose 0.1 percent from the prior month and 2.1 percent from a year earlier, according to a Labor Department report Tuesday. The surge is also higher as compared to the consumer inflation in January, recorded at 1.97 per cent.

"With the headline inflation reading at 2.57 per cent and industrial production surprising on the downside at 1.7 per cent, there clearly is a case and space for one more rate cut of 25 bps by RBI in April to support growth", Rajni Thakur, Economist, RBL Bank, said.

Food price inflation for rural areas stood at (-) 1.75 in February 2019 against (-) 2.80 per cent in January and 3.70per cent in February past year. The broader CPI rose 0.2% from January, the first increase in four months, though the 1.5% annual gain missed projections and was the smallest rise since 2016. Food inflation was in the negative at 0.66 per cent. That index tends to run slightly below the Labour Department's CPI, and January figures are due March 29. Food consumed at home rose 0.4 per cent last month, boosted by more expensive dairy products, fresh vegetables, cereals and meat. The index was unchanged for three straight months.

Retail inflation climbs to 2.57%, factory output decelerates to 1.7%

A New York Fed survey of consumer expectations published on Monday showed a drop in inflation expectations in February.

"With nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures, the [Federal Open Market] Committee has adopted a patient, wait-and-see approach to considering any adjustment in the stance of policy", Fed Chairman Jerome Powell said during a speech in Stanford, Calif., last week. It hit the U.S. central bank's 2% inflation target in March 2018 for the first time since April 2012. A decline in core goods prices (-0.2% m/m) was the culprit behind the softness in core inflation. This marks the strongest inflation-adjusted wage growth since November 2015, an increase that would likely help consumer spending and economic growth. That followed a 1.1 per cent jump in January.

Prices for new motor vehicles, used cars and trucks, as well as recreation fell.

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