Inflation falls to 4.4 per cent, factory growth rises

India’s industrial output rose by 7.5% in January retail inflation declined to 4.44% in February

An Indian man works at a cycle spare parts factory in Ludhiana | Money Sharma AFP

The industrial output had increased 7.1% in December 2017 compared to the output in December 2016.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in February on a seasonally adjusted basis after rising 0.5 percent in January, the U.S. Bureau of Labor Statistics reported today. For example, higher minimum support prices (MSP) and increase in coverage of procured crops because of higher MSPs could influence food inflation. Both categories increased for the second straight month after being down in the promotionally charged retail environment in December.

In a sustained improvement in economic conditions, retail inflation in February eased as food prices softened, while industrial production soared in January.

The central bank expects retail inflation to pick up to 5.1 percent to 5.6 percent in April-September before easing, assuming normal rainfall.

The food index was unchanged, while prices for food at home decreased 0.2%.

The Index of Industrial Production (IIP) had grown at 7.1 per cent in December 2017. The RBI targets inflation over the medium term at 4 percent with an upper limit of 6 percent and a lower threshold of 2 percent. The manufacturing sector saw growth quickening marginally to 8.7% in January from 8.4% in the previous month.

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For the year, headline inflation increased 2.2%, the report said.

As per use-based classification, the growth rates in January 2018 over January 2017 are 5.8 percent in primary goods, 14.6 percent in capital goods, 4.9 percent in intermediate goods and 6.8 percent in infrastructure/construction goods.

Compared to the same month a year ago, consumer prices were up by 2.2% in February, reflecting a modest acceleration from the 2.1% increase in January. The highlighted 2 percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index. It sees gross value added - a key measure of growth - increasing 7.2% next fiscal year from 6.6% this year.

USA stocks opened higher on Tuesday as investors digested the newly released consumer price data.

And core inflation will likely jump next month because a sharp drop in the cost of cell phone services last year will fall out of the year-over-year data.

Gas prices and the cost of hospital services declined, but apparel prices and vehicle insurance rates spiked, which ticked the overall rate higher, Bank of Montreal economist Robert Kavcic noted.

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