Interactive Inflation Map for June 2011

Check out MarketVision's Interactive Inflation Map for June 2011, according to data released today.

Quick Note: What is this "Inflation" thing?

Skip if you know about the WPI and the concept of inflation.

Inflation data is released monthly. Today's release was a provisional estimate for Jun 2011. They will revise it two months later, in September (along with the release of August provisional data).

Inflation is calculated based on the wholesale price of certain elements, which comprise our usage (supposedly). The Wholesale Price Index (WPI) is a basket of these elements, weighted appropriately. So the price of onions (1 kg worth) gets a weight of 0.17% while crude petroleum price will be 0.90%.

The basket is hierarchical - so Onions is grouped under "Vegetables", which comes under "Fruits and Vegatables" which is further under "Food articles"->Primary Articles->Overall WPI Basket.

Each level is accorded a weight, and the broad three categories are Primary Articles (20%), Fuel (15%) and Manufactured Products (65%). The first two are revealed every week, but Manufactured product data is only announced every month, which is why the Inflation exercise can only be done once a month.

The prices announced are as a factor of the price in a "base year", which currently is 2004-05. So a value of 198 means that the price of that item is 1.98 times the price in 2004-05 (the base is 100). We calculate inflation by comparing the price value today versus one year back.

Overall Inflation at 9.44%

For June 2011, Inflation came in at an overall level of 9.44%, which is much higher than the comfort level of the government and RBI.

Overall Inflation Chart

What we see from the graph is that since Jan 2010, inflation has been above 9% for the most part. This is very high, and even if you think that there seems to be a small dip from the highs in March/April, consider that April data was originally just 8.66% - it has now been revised to a whopping 9.74%, which is a significant change.

Also remember that the diesel price was increased in June and it doesn't seem like much of that increase has yet been reflected in the index. If another big revision happens later to the current June Number, we are likely to see a higher number, perhaps even in two digits.

Big Past Revisions

Revisions 

 

Inflation Components

Inflation Components

Important: Manufactured Goods is at it's highest level since October 2008 (which is when oil prices hit new highs). Primary articles and fuel are high - as I've been saying on weekly charts. Note that all the lines are now sloping upwards.

Inflation Map: Overall

Inflation Map June 2011

The colours are coded according to this legend:

For each item, Inflation is shown as [Category Name] (Annual Inflation, Change from Last Month).  The size of each box is the weight of the commodity. Use the left and right mouse buttons to navigate (zoom in or out)

Primary Articles : +12.22%

Primary Articles

Important: Crude Petroleum prices have been updated after five months, showing a 47% increase over last year. While Fruits and Veggies have moderated, Spices, Milk and Non-Vegetarian food items have gone up.

Fuel: +12.85%

Fuel

And this is not considering much of the diesel price increase. Petrol was upped in May, which now shows a 30% increase. Coke prices are still not updated.

 

Cotton Prices Moderate

Textiles

With cotton at the primary level coming down, cotton textiles and yarn prices have come down a little bit. This should hurt textile players (or help garment manufacturers, however you look at it)

Rubber Still Shows Signs of Strength

Rubber and Plastics

You'll also notice that polyester film prices, which had been going up for most of last year, are now coming down with a vengeance. Players like UFlex, Polyplex and Jindal Polyester have been hit hard by the softening prices. Rubber prices have stayed strong throughout, and are continuing to show high inflation. At some level, demand will die.

Auto Prices Benign

Auto

Lastly, Automobile prices have stayed very low (other than motorcycles). But there were a number of price hikes announced in June, which I feel haven't been included yet, and will appear in revisions.

Please feel free to explore the interactive map. Do tell us what you think!

Comments

Hi Deepak and Team

Hi Deepak and Team Marketvision,

Many thanks for such a simple yet effective understanding. Honestly speaking, after years of watching CNBC and other business channels, i could not have learns what i have understood very quickly today from your article/post.

Once again, a BIG thank you!

Regards,
Bhavin