A sharp correction in the perishable food price index may have deceived inflation watchers in October, but the resurgence of the food bull, coupled with steadying fuel prices is likely to keep inflation on the stove in the months ahead.
Latest data released by the Federal Bureau of Statistics show that consumer prices rose by 15.33 percent in October year-on-year - much less than the median estimate (of 16.38 percent) of analysts and bankers polled by Reuters.
The variation can be attributed to an unexpected drop in some perishable food items that led to a 6.66 percent month-on-month decline in its price index - albeit, its a wonder why many inflation onlookers failed to expect the drop coming on account of slowing SPI inflation between mid-October and mid-September.
According to the FBS data, the price of onions fell by 29 percent in October month-on-month, whereas that of tomatoes and farm chicken was down by 18.58 percent and 10.97 percent respectively. And to the surprise of many, even the price of sugar eased by 1.12 percent over September. Talk about irony.
Anyway! Food prices, including that of onions and sugar, are back in action, with the Sensitive Price Index showing a rise of 2.87 percent between October 15 and November 4. Week-on-week SPI has been steadily increasing since mid-October - rising 1.39 percent in the week ending November 4.
That, and the fact that global oil prices are seen firm with more possibility of upside risks in the wake of the Feds monetary easing, the CPI basket is likely to stay warm in November, despite a relatively higher base than in October.
But all is not bad; core inflation eased further to 9.3 percent last month and hopefully will not rise to alarming levels - i.e. double digits - any time soon. Another silver lining is the higher base affect come January that will likely slow the pace of year-on-year inflation.
Then again, if - and thats a big if - the government has its way and the reformed GST is actually implemented come January, there will likely be an abrupt price hike in many items of the CPI basket - akin to the shifting of the price curve that business graduates are usually taught in schools.
How exactly will the RGST affect the CPI is perhaps another discussion. But as far as other controllable factors are concerned, businessmen and the markets continue to look to the government for fiscal discipline and better administration to allay the expectations of rising inflation.
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