CPI Inflation Rises As Food Prices Increase

Retail inflation rose for the second straight month, led by an increase in food prices.

Consumer Price Index inflation stood at 2.86 percent in March compared to 2.57 percent in February, according to data by the Ministry of Statistics and Program Implementation. A Bloomberg poll of 37 economists had estimated 2.8 percent.

CPI inflation had declined for four straight months till January before it started rising. Inflation in the quarter ended March was 2.47 percent compared to the central bank’s revised estimate of 2.4 percent. Ironically, as headline inflation rises, core inflation is finally beginning to adjust lower, indicating weaker demand conditions.

Key Highlights

• CPI food inflation stood at 0.3 percent in March compared to -0.66 percent in February.
• Fuel and light inflation stood at 2.42 percent vs 1.24 percent.
• Housing inflation was 4.93 percent against 5.1 percent in February.
• Inflation in the households goods and services segment fell to 6.05 percent from 6.29 percent.
• Clothing and footwear inflation also eased to 2.59 from 2.73 percent.
• Inflation in the transport and communication segment cooled to 2.98 percent from 3.08 percent in the previous month.
• Health inflation rose to 8.86 percent from 8.82 percent in February.
• Inflation in the education segment was 7.58 percent compared with 8.13 percent in February.

End Of Food Deflation?

After months of disinflation, food prices are now starting to rise, albeit at a modest pace. Cost of food articles remained below the levels seen last year in rural areas but showed a increase compared to 12-months ago in urban areas.

Overall, the food and beverages rose to 138.1 in March from 137.5 in February.

The early signs of a pick-up in food prices is seen in the rise of the food and beverages index on a month-on-month basis. Three key components of this index — fruits, vegetables and pulses — all saw a pick-up over last month.