Consumer inflation eases to 1-year low of 4.75% in May

Consumer Inflation Data May 2024 News: Retail inflation in the country - measured by the Consumer Price Index (CPI) - stood at 4.75 per cent last month, the lowest level recorded in 12 months, according to official data released on Wednesday. The CPI reading was aided by a fall in fuel rates though food prices continued to be at elevated levels. Consumer inflation—also known as retail inflation—is the rate of increase in the prices consumers pay for a basket of select goods and services.

The latest monthly reading comes days after the Reserve Bank of India (RBI) maintained its consumer inflation forecast for the year ending March 31, 2025, at 4.5 per cent citing "evenly balanced" risks, while leaving the repo rate as well as the policy stance unchanged following a bi-monthly review. 

The central bank now projects domestic retail inflation at 4.9 per cent in April-June, 3.8 per cent in July-September, 4.6 per cent in October-December and 4.5 per cent in January-March in the current financial year. 

"Core inflation has been consistently trending down since early 2023 and is now at an all-time low of 2.97 per cent, reflecting some demand imbalances and gaps in the economy. Nonetheless, food prices still need a watch, with ongoing heatwaves and low reservoir levels that could put stress on fruit and veg prices," said Madhavi Arora, Lead Economist at Emkay Global Financial Services.   

"We will also be watching the MSP price announcement for kharif crops in the coming weeks," Arora added.  

What is consumer inflation? 

Consumer inflation is a crucial economic indicator that measures the average change over time in the prices paid by urban consumers for a basket of goods and services.

The Consumer Pice Index reflects the cost of living for the average household and is essential for assessing price stability and making informed economic decisions.

The CPI data plays a significant role in shaping economic trends and influencing financial decisions at both individual and institutional levels.

Several factors influence consumer inflation, such as supply and demand dynamics, production costs, exchange rates, and government policies.

Changes in these variables can lead to fluctuations in prices, affecting the CPI and ultimately impacting consumers' purchasing power.

Factory output

Separate official data showed industrial production in the country grew 5.0 per cent in April, lower than 5.4 per cent the previous month.