Friday June 26, 2009
NEW DELHI: India's wholesale prices fell less than expected in mid-June from a year earlier, marking a build-up in price pressures as the economy picks up and the effect of past sharp falls in energy prices wears off. The wholesale price index fell 1.14 percent in the 12 months to June 13, compared with analysts' median forecast of a 1.69 percent drop and the previous week's 1.61 percent decline, government data showed on Thursday.
Wholesale prices are expected to keep falling in annual terms in weeks ahead and economists expect the central bank to keep its interest rates low in the near term. But the data reinforced expectations that the closely watched wholesale price gauge will start climbing again from September onwards and some analysts say the rise will be steeper than earlier thought, possibly prompting a rate rise by year-end.
"What this means is that the patch of negative annual WPI (wholesale price index) will be shortened," said D.K. Joshi, principal economist of rating agency Crisil. "Interest rates stance will remain soft. There could be a mild reduction," he said on short-term outlook.
Markets track the wholesale price index more closely than consumer prices because it covers a wider range of products and is published weekly while consumer price reports are published monthly. The 5-year bond yield rose 2 basis points to 6.58 percent after the data, while the benchmark stock index rose, before slipping back into the red in afternoon trade.
The annual declines in prices result from the comparison with last year's elevated price levels reflecting soaring oil prices, which peaked in mid-2008. But wholesale prices have been rising on a week-on-week basis since March, reflecting a revival in demand in Asia's third largest economy. Annual consumer price inflation climbed to 8.7 percent in April from 8 percent in March though it was still below February's 9.6 percent level.
Analysts said that with the statistical base effect set to fade away and concerns about food supply because of lower than normal rainfall this year, wholesale price inflation may spike above the central bank's estimate for the end of the fiscal year to March 2010. Following the data analysts pegged the rate at 5.5-8 percent compared with the central bank's earlier 4 percent forecast.
(Reuters)
NEW DELHI: India's wholesale prices fell less than expected in mid-June from a year earlier, marking a build-up in price pressures as the economy picks up and the effect of past sharp falls in energy prices wears off. The wholesale price index fell 1.14 percent in the 12 months to June 13, compared with analysts' median forecast of a 1.69 percent drop and the previous week's 1.61 percent decline, government data showed on Thursday.Wholesale prices are expected to keep falling in annual terms in weeks ahead and economists expect the central bank to keep its interest rates low in the near term. But the data reinforced expectations that the closely watched wholesale price gauge will start climbing again from September onwards and some analysts say the rise will be steeper than earlier thought, possibly prompting a rate rise by year-end.
"What this means is that the patch of negative annual WPI (wholesale price index) will be shortened," said D.K. Joshi, principal economist of rating agency Crisil. "Interest rates stance will remain soft. There could be a mild reduction," he said on short-term outlook.
Markets track the wholesale price index more closely than consumer prices because it covers a wider range of products and is published weekly while consumer price reports are published monthly. The 5-year bond yield rose 2 basis points to 6.58 percent after the data, while the benchmark stock index rose, before slipping back into the red in afternoon trade.
The annual declines in prices result from the comparison with last year's elevated price levels reflecting soaring oil prices, which peaked in mid-2008. But wholesale prices have been rising on a week-on-week basis since March, reflecting a revival in demand in Asia's third largest economy. Annual consumer price inflation climbed to 8.7 percent in April from 8 percent in March though it was still below February's 9.6 percent level.
Analysts said that with the statistical base effect set to fade away and concerns about food supply because of lower than normal rainfall this year, wholesale price inflation may spike above the central bank's estimate for the end of the fiscal year to March 2010. Following the data analysts pegged the rate at 5.5-8 percent compared with the central bank's earlier 4 percent forecast.
(Reuters)
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