CPI Preview: Retail Inflation Expected To Fall To Lowest Since 2019
Food and beverage inflation is seen easing to 0.24% in June from 1.5% in May.
India's retail inflation is likely to continue to dip further in June after easing to the lowest since February 2019.
The Consumer Price Index-based inflation is projected to ease to 2.33% in June, according to a median forecast of economists polled by Bloomberg. This is after it came in at 2.82% in May — the lowest in 75 months and below the central bank's target of 4%.
If inflation does come close to this estimate, it will be the lowest print since January 2019, when it was at 1.97%.
Food and beverage inflation is seen easing to 0.24% in June from 1.5% in May, despite sequential increase in vegetable prices, led by tomatoes, according to estimates by Teresa John, economist at Nirmal Bang Institutional Equities, who expects headline inflation at 2.18% for the month.
John pencils in a month-on-month rise of 9.5% in vegetable prices, led by over 36% month-on-month increase in the price of tomatoes. However, vegetable inflation may still decline 17.2% annually in June.
The volatile tomato, onion, potato prices, albeit some sequential aberrations, are largely contained, driven by better supply dynamics, stated a research note by Dipanwita Mazumdar, chief economist at Bank of Baroda, who expects CPI inflation at 2.6% in June.
Prices of cereals and edible oils are likely to remain subdued, supported by a good harvest and reduction in customs duty for edible oil, John said. Pulses prices may continue to ease sequentially.
The broader comfort will be provided by a favourable base, Mazumdar said. Even globally, food and metal prices were in favour, she said, adding that even international edible oil prices are largely in check. This is likely to break away the stickiness of domestic edible oil prices which are still running in double digits.
Core CPI is seen largely range bound at 4.21% in June, with gold prices remaining largely steady, John said, despite an uptick in prices on a month-on-month basis, John said.
Energy prices were elevated mainly on account of the Israel-Iran war. The ceasefire has provided much degree of comfort on that front. Still, for retail energy prices, it is not much of a worry as the buffer is with the OMCs, Mazumdar added. Thus, inflationary pressure is still residing on the downside. A moderation in gold price in June would also largely cap core inflation, she added.
