Inflation spikes to 5-month high in June, factory growth slows

Retail inflation rose to a five-month high of 5% in the month of June compared to 4.87% in May, data from the Central Statistics Office showed. The data is below a Reuters estimate of 5.3% for the month of June but well above RBI's comfort level of 4 per cent.The industrial production moderated to 3.2% in May compared to 4.9 per cent in April. The slowdown in the industrial production comes on the back of a moderation in the growth of core sector industries which rose 3.6 per cent in May compared to 4.6 per cent in April. The eight infrastructure sectors of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity constitutes 40.27 per cent of the index of industrial production. #BREAKING | Here is the IIP trend (month on month): https://t.co/msXvJgkqkD— ET NOW (@ETNOWlive) 1531397237000 The industrial production index has been pulled down by a sharp moderation in the growth of the manufacturing sector which registered a growth of 2.8% vs 5.2% in April. The electricity production rose to 4.2% vs 2.1% in April while the mining output in May stood at 5.7% vs 5.1% in April. The index of industrial production for April has been revised to 4.8 per cent from the earlier figure of 4.9 per cent.The inflation in food prices fell to 2.91% vs 3.10% last month. The CPI for fuel, light rose to 7.14% vs 5.8% in May. The CPI for vegetable dropped to 7.8% vs 8.04% in May. Housing inflation came in at 8.45% vs 8.4% last month. The higher inflation risks the RBI changing its stance in the upcoming bi-monthly policy review in August and could mean a possible rate hike. In its last policy review in June, the RBI had hiked the repo rate by 25 basis points to 6.25 per cent citing inflationary concerns but kept the stance neutral. The rise in inflation comes in the backdrop of higher crude oil prices, which have risen by more than 20 per cent this year. The impending threat of sanctions on Iran has raised the spectre of further hardening of global crude oil price, thereby putting pressure on the Indian crude oil basket as it is one of Iran's major crude oil importers.The recent hike in the minimum support prices (MSPs) for Kharif crops could add Rs 15,000 crore to government expenditure raising fears of higher inflation.The RBI had, in its policy review in June, revised upwards its inflation projection to 4.8-4.9% for the first half of 2018-19.

from The Economic Times https://ift.tt/2Lb4JeB