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INDIA: Headline CPI Expected to Moderate Further on Base Effects (13:00BST)

INDIA
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India has two major data releases today, August CPI and July Industrial Production, which could provide guidance on the possibility of a rate cut at the RBI’s next meeting in October. Data is released at 13:00BST/17:30 local time.

  • July’s CPI release saw significant moderating of inflation from 5.08% Y/Y in June to 3.54% in July. Market expectations for August are for a further moderation to 3.47% on the back of declining food prices for the year-on-year comparison.
  • Additionally, Industrial Production is set to be released where economists are predicting a rise from 4.2% Y/Y in June to 4.6% in July. June’s release was a significant miss relative to expectations with a decline in manufacturing surprising markets.
  • Sell side views on the inflation release below:
    • Goldman Sachs expect headline CPI to remain unchanged at 3.4% y/y. They estimate food inflation to contract sequentially by 1.0% m/m, implying a year-on-year decline of 4.5%. Goldman Sachs expect core inflation to increase to 3.5% y/y as they bake in the remaining part of the mobile tariff hikes in June to pass through to core services inflation.
    • Morgan Stanley expect CPI inflation to remain steady at 3.5% y/y on the back of base effects. On a year-on-year basis, the trend is likely to remain mixed across segments; while food CPI moderates, fuel CPI remains steady and core inches up.
    • JP Morgan expect headline CPI at 3.3% y/y – though note that both the July and August prints have been helped by large base effects. Notwithstanding that, headline CPI prices are expected to fall 0.3% m/m, thanks to declining food prices. They note that with the monsoon tracking 8% above normal, healthy sowing and softer global food prices, the outlook for food inflation is looking progressively more constructive. 
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India has two major data releases today, August CPI and July Industrial Production, which could provide guidance on the possibility of a rate cut at the RBI’s next meeting in October. Data is released at 13:00BST/17:30 local time.

  • July’s CPI release saw significant moderating of inflation from 5.08% Y/Y in June to 3.54% in July. Market expectations for August are for a further moderation to 3.47% on the back of declining food prices for the year-on-year comparison.
  • Additionally, Industrial Production is set to be released where economists are predicting a rise from 4.2% Y/Y in June to 4.6% in July. June’s release was a significant miss relative to expectations with a decline in manufacturing surprising markets.
  • Sell side views on the inflation release below:
    • Goldman Sachs expect headline CPI to remain unchanged at 3.4% y/y. They estimate food inflation to contract sequentially by 1.0% m/m, implying a year-on-year decline of 4.5%. Goldman Sachs expect core inflation to increase to 3.5% y/y as they bake in the remaining part of the mobile tariff hikes in June to pass through to core services inflation.
    • Morgan Stanley expect CPI inflation to remain steady at 3.5% y/y on the back of base effects. On a year-on-year basis, the trend is likely to remain mixed across segments; while food CPI moderates, fuel CPI remains steady and core inches up.
    • JP Morgan expect headline CPI at 3.3% y/y – though note that both the July and August prints have been helped by large base effects. Notwithstanding that, headline CPI prices are expected to fall 0.3% m/m, thanks to declining food prices. They note that with the monsoon tracking 8% above normal, healthy sowing and softer global food prices, the outlook for food inflation is looking progressively more constructive.