Bhubaneswar: The price rise pinches hard. In October, the retail inflation tanked to a 14-month high reveals a report from ICICI research. The report blamed the high rate of inflation to gold and silver rush in festival season and vegetables, especially onion.
As per the report, Gold prices pushed the core inflation to a 10-month high of 3.7% Year-on-Year (YOY) in October (3.5% in September).
GOLD RUSH SIDE EFFECT
The ICICI research report has observed the following commodities and services behind the high inflation.
- The core inflation rose to a 10-month high of 3.7% Year-on-Year (YoY) in October (3.5% in September).
- Pick-up in core inflation is primarily driven by personal care and effects that rose to a 45-month high of 11% YoY in Oct (9.0% in Sep).
- The surging to a 45-month high in personal care commodities can be explained by 4.7% Month-on-Month (MoM) increase in gold
- And 6.5% MoM increase in silver prices.
- The report says gold prices have seen a dip in Nov, which should then result in downward pressure on core inflation.
ONION DANCE
The consumer price index (CPI) or retail inflation accelerated to a 14-month high of 6.21% YoY in October. The ICICI research report attributed the reason to food inflation which moved to a 15-month high of 10.9% YoY from 9.2% in Sep.
The report says vegetable prices saw sequential uptick in October. The price rise had been at 8.2% MoM after a 3.5% MoM increase in September.
- On a YoY basis, vegetable prices are running at a 57- month high of 42% YoY (means the price rise in vegetables, on average, has been 42% more than last year October)
- Prices are driven by TOP
- Tomato (161% YoY),
- Onion (52% yoy)
- Potato (65% YoY)
The report attributed the surge in October to higher rainfall in August and September driving 49% MoM increase in tomato prices given a 28% decline in mandi arrivals in last two months.
NOVEMBER COOLING?
The ICICI research report reveal some deceleration of vegetable prices in November. However, the report underlined that onion prices continue to remain elevated in November, when the veggie prices are seeing a dip of 4.1% MoM in Nov so far.
Apart from veggies, edible oils (+6.0% MoM), eggs (+1.9% MoM), fruits (+1.5% MoM), cereals (+0.9% MoM), meat and fish (+0.6% MoM), and pulses (+0.4% MoM) saw a pick-up in sequential momentum.
ICICI INFLATION OUTLOOK
The report presenting its outlook said, normally, such a surge in vegetable prices is followed by equally sharp decline later.
It says, the 1st advance estimates released by government show kharif foodgrain output to be higher by 5.7% YoY thus leading to deceleration in cereal inflation to 6.9% YoY (7.9% YoY in FY Third quarter 25).
But increase seen in edible oils along with lower mandi arrivals for onion and potato this year point to a scenario where winter decline in food inflation is not likely to be large enough to more than offset the increase seen upto now (42% increase in veggie prices).
