CPI, IIP data today: Will there be any surprises? Find out here

CPI, IIP data: The Central Statistics Office (CSO) will be presenting data India's two economic indicator namely Consumer Price Index (CPI) for February 2018 month, and Index of Industrial Production (IIP) for January 2018 month. India's consumer price index (CPI) or retail inflation stood at 5.07% in the month of January 2018, lower from 5.21% in December 2017. However, the CPI was higher if compared with 3.17% of the corresponding month in the previous year. Meanwhile, the Core CPI has remained stable at 5.14% compared to 5.13% in Dec’17. The overall CPI inflation came below core inflation in the current month.

"Overall build-up in inflation remained strong and was broad-based. Ease in inflation was largely on account of sharper ease in urban food inflation vis-à-vis rural," Dhananjay Sinha and Kruti Shah analysts at Emkay said.

source: tradingeconomics.com

While Index of Industrial Production (IIP) or factory output for the month of December 2017 came in at 7.1%, compared to 8.4% in November 2017 and 2.2% in the month of October 2017. 

IIP growth remained elevated in December,  partly reflecting lower base and is also due to marginal improvement in production activity. 

source: tradingeconomics.com
Now that the latest data of CPI and IIP would be announced on Monday, here's what analysts are expecting. 

CPI

Firstly, the Reserve Bank of India (RBI), which takes into consideration the inflation indicator for deriving it's position on India's monetary policy stance, had increased the CPI target for Q4FY18. 

RBI in this policy stated that the December bi-monthly resolution projected inflation in the range of 4.3-4.7% in the second half of 2017-18, including the impact of increase in HRA. In terms of actual outcomes, headline inflation averaged 4.6% in Q3, driven primarily by an unusual pick-up in food prices in November. 
 
RBI said, "Though prices eased in December, the winter seasonal food price moderation was less than usual. Domestic pump prices of petrol and diesel rose sharply in January, reflecting lagged pass-through of the past increases in international crude oil prices."
 
Considering the above mentioned factors, RBI now estimate inflation to be at 5.1% in Q4, including the HRA impact.

The duo at Emkay said, "We maintain our view of inflation hardening to 5.2% on an average in Q4FY18."

On the other hand, Teresa John analysts at Nirmal Bang said, "CPI inflation for February 2018 is likely to come in at 4.9%, down from 5.1% in the previous month."

John adds, " The likely softening in inflation is largely on account of a sustained decline in vegetable prices. Prices of onions and tomatoes continued to fall, while potato prices witnessed an uptick. Pulses prices also continue to remain sluggish."

"Food and beverage inflation is likely to moderate to 4.2% YoY from 4.6% in the previous month, despite a higher base. However, core CPI inflation is also likely to inch up to 5.26% from 5.14% in January 2018 on a lower base, and pass-through of past increases in input costs, " said John.

Similar views were from Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at State Bank of India, "The 1st week Mandi prices indicate that vegetable prices are declining in Feb’18. So, we believe CPI inflation for Feb’18 will be lower than the Jan’18 number (if the first week trend follows through)." 

Ghosh adds, "Inflation for the Feb’18-Jun’18 period is likely to be on the higher side owing to base effect (average inflation for Feb’17-Jun’17: 2.83%). However, CPI inflation has been rising since Jun’17 which will result in toned down inflation for Jun’18-Nov’18 period. So on a net basis, CPI inflation is expected to remain modest and the average CPI for FY19 would be around 4.7% compared to 3.7% average growth in FY18 (actual + projected)."

Stewart Mackertich expects CPI for February 2018 month to come in at 4.74%. 

IIP

Emkay says, "We believe, that IIP growth in Q4FY18 will average at ~6.5% from Q3FY18 average of 6.0%. Overall improvement in growth is likely to be from amelioration in consumption activity (as reflected in retail credit and auto sales) and increase in overall global trade momentum."

Ghosh for IIP said, "We expect IIP growth to trend higher in January also as commercial vehicle sales have expanded by 36.6%. The positive contribution of cement, diesel and even two wheelers augurs well for economic recovery, especially for rural economy."

In Nirmal Bang's views, " IIP is likely to come in at 6.7% YoY for January 2018, slightly lower than 7.1% in the previous month. The Manufacturing PMI moderated to 52.7 in January 2018, from 54.7 in the previous month." 

Talking on other sectors, Nirmal Bang adds, "Core sector activity rose 6.7% YoY in January 2018, up from 4.2% in the previous month, led by strong refinery output (up 11%YoY) and cement production (up 20.7% YoY) on the back of a favourable base. Steel production rose 3.7%YoY, despite a strong base. Electricity production was also robust, rising 8.8%YoY. The mining sector’s performance was relatively weak, although coal output rose 3% YoY after a decline in the previous month."

While Stewart Mackertich expects IIP for January 2018 month to come in at 6.40%.