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Motilal Oswal Report
Headline consumer price index inflation came in at 5.7% YoY in December 2023 versus 5.6% in November 2023, mainly led by 48-month low core inflation at 3.8% (versus 4.1% in November 2023). It was partly offset by higher food inflation at 9.5% in December 2023 versus. 8.7% in November 2023.
The number was lower than the Bloomberg consensus of 5.9% and our forecast of 6.3% as inflation in core components and vegetables came in lower than our expectations. CPI inflation averaged 5.4% in Q3 FY24, which is lower than the Reserve Bank of India expectations of 5.6%.
Food inflation came in at 9.5% YoY in December 2023 versus 8.7% in November 2023 and 4.2% in December 2022. It decreased 0.9% month-on-month in December 2023. Details suggest that the acceleration in food inflation was mainly due to vegetable prices (weight = 6%), which rose 27.6% YoY, following a 17.7% YoY increase in November 2023.
CPI ex-veggies slid to a 48-month low of 4.4% YoY (lowest since December 2019) from 4.7% last month. At the same time, inflation in cereals, pulses, and spices remained sticky in double digits.
Notably, core CPI (excluding food and beverages and fuel and light) came down to 3.8% in December 2023 from 4.1% in November 2023, the lowest in almost 48 months. The deceleration was broad-based.
The Index of Industrial Production decelerated to a 13-month low of 2.4% YoY in November 2023 (versus 11.6% in October 2023, revised lower from 11.7%). The deceleration in growth was mainly led by a high base (7.6% in November 2022) and fewer working days in November 2023 due to Diwali holidays.
The number is lower than the Bloomberg consensus of 4% and our forecast of 4.9%. During April-November 2023, industrial output grew 6.5%.
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