CPI inflation during Feb21 increased to 8.70% compared with 5.65% recorded during Jan21. This increase was largely a product of: 1) dissipation of the high-base effect, and 2) a sharp increase in electricity prices (+29% M/M). On a monthly basis, inflation picked up by 1.80% M/M primarily because of high food and housing index. Cumulatively, inflation averaged 8.25% during 8MFY21 compared to 11.71% recorded during 8MFY20.
Food inflation resumes its inclining trajectory
The food index resumed its inclining trajectory, rising by 0.8% M/M after price hikes in various commodities within the food basket, pre-dominantly chicken (+37% M/M), cooking oil (+12% M/M), fruits (+9% M/M) and ghee (+9% M/M). Recall that food inflation had slowed down by 2.7% M/M back in Jan21 after the federal government took major steps to alleviate the food group’s supply constraints. Onwards, we foresee food inflation to depict a sharp uptrend as the month of Ramzan approaches (Apr21).
Moreover, the housing index (weight: 24%) witnessed a sharp increase of 4.4% M/M after a 29% rise in the prevalent electricity charges