INDIA: Favourable Base Effects Expected to Drive Disinflation in July

Inflation data for July will cross the wires at 13:00BST/17:30 local time. Consensus looks for a decrease in the headline figure from +5.08% y/y in June to +3.60% y/y in July, largely due to favourable base effects.

• Goldman Sachs expect headline CPI to drop to 3.5% y/y, on the back of favourable base effects. They estimate food inflation to increase sequentially by 2.4% m/m on an increase in vegetable prices by +15% m/m. In year-on-year terms, they expect food inflation to decline to 5.0% y/y (vs. 8.4% y/y in June) and expect core inflation to increase modestly to 3.3% y/y.
• JP Morgan say inflation is expected to soften on very favorable base effects. In sequential terms, headline prices likely rose by a strong 0.9% m/m in July led by food prices which strengthened 1.2% m/m. The increase in food prices was led by volatile vegetables, they say. The good news is that high frequency prices suggest that vegetable prices, which saw a sharp jump in the last couple of months, have begun normalising in August. JPM expect core-core inflation to come at 3.7% y/y.