CPI Inflation Rises To A Three-Month High Of 6.52% In January

The Consumer Price Index inflation was at 6.52% in January 2023, compared to 5.72% in December.

<div class="paragraphs"><p>(Source:&nbsp;<a href=";utm_medium=referral&amp;utm_content=creditCopyText">Frédéric Barriol</a>/<a href=";utm_medium=referral&amp;utm_content=creditCopyText">Unsplash</a>)</p></div>
(Source: Frédéric Barriol/Unsplash)

Retail inflation rose to the highest since November, led by a pick-up in food prices.

The Consumer Price Index inflation was at 6.52% in January 2023, compared to 5.72% in December, according to data released by the Ministry of Statistics and Programme Implementation, on Monday.

A Bloomberg poll of 35 economists had estimated a reading of 6%.

Core inflation was at 6.28% in January, compared to an estimate of 6.3% according to Bloomberg.

Inflation in food and beverages was at 6.19% in January, compared with 4.58% in December. Vegetable prices fell by 11.78%, as against a fall of 15.08% in December.

The 6.52% CPI inflation print for January 2023 has indeed been a negative surprise for the markets, said Suman Chowdhury, chief analytical officer at Acuité Ratings.

The trajectory in food inflation has been quite different from the expectations, turning significantly positive at 0.45% month-on-month, as compared to a contraction in the previous two months which is typical of the winter season, he said.

What has turned the tide for food inflation in January is the continuing rise in cereal prices, at 2.2% month-on-month, apart from the higher inflation in almost all animal protein categories, namely meat and fish, egg and milk products. However, the base factor is also partly to blame, given that there was a sequential decline in the inflation index last January, he said.

Suvodeep Rakshit, senior economist at Kotak Institutional Equities, also said that with cereals prices staying on the upside, inflation could remain around the 5.5-6% mark in the near term.

The hawkish tone of the RBI in the February policy seems justified, with both headline and core inflation remaining sticky and elevated, said Rakshit.

The RBI is unlikely to change its stance in the April policy, while a 25 basis points hike is a possibility now, compared to a larger probability of pause earlier, he said.

Inflation Internals

  • Cereal prices rose 16.12% in January, compared to 13.79% in December.

  • Inflation in meat and fish was at 6.04%, as against 5.13% last month.

  • Inflation in eggs was at 8.78%, as against 6.19% last month.

  • Inflation in milk was at 8.79%, compared with 8.51% in the previous month.

  • Inflation in oils and fats was at 1.41%, compared with 0.53% in December.

  • Pulses inflation was at 4.27%, as against 3.89% in the preceding month.

  • Clothing and footwear inflation was at 9.08%, compared with 9.58% a month ago.

  • Housing inflation rose by 4.62%, as against 4.47% in the previous month.

  • Fuel and light inflation stood at 10.84% in January, as against 10.67% in December.

Sequential Drivers

Sequentially, CPI inflation rose by 0.46% month-on-month in January 2023. This is the highest sequential momentum observed in the month of January, which usually enjoys a decline in price, according to a note by QuantEco Research.

The series month-on-month average for January stood at -0.17% before this print, it said.

The food and beverages index clocked a sequential momentum of 0.45% month-on-month in January 2023. While this might appear moderate, it needs to be juxtaposed against the series average of -0.76% month-on-month seen in January, said economists at QuantEco Research.

The jump in prices was led by cereals.