Annual core CPI in August rose to 2.4% vs. 2.3% expected

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The August 2019 retail inflation rate is the highest since October 2018, when it was recorded at 3.38 per cent. "We see scope for more (monetary policy) easing".

After slapping more tariffs on each other at the start of this month, the USA and China agreed to return to the negotiating table early in October for the first time since July's failure to find a compromise. The CPI gained 0.3 per cent in July.

Echoing similar sentiments, Devendra Kumar Pant, Chief Economist with India Ratings & Research, said that with first quarter GDP growth falling to 5 per cent and private final consumption expenditure growth declining to 3.1 per cent, the pressure will be on the RBI to take monetary measures to support growth. Core consumer prices, which exclude the volatile categories of food and energy, increased 0.3% from the previous month.

Product-wise, prices of pulses, vegetables, eggs, meat and fish pushed the retail food inflation higher on a year-on-year (YoY) basis. In the 12 months through August, the CPI increased 1.7 per cent, slowing from July's 1.8 per cent advance. "At present, we expect the CPI inflation to inch up in the next print, while remaining well below the MPC's target of 4 per cent", Nayar said.

A separate Labor Department report Thursday showed average hourly earnings, adjusted for price changes, rose 1.5% in August from a year earlier, following 1.4% in July.

While the resumption of trade talks has eliminated the odds for a 50bps rate cut in September according to Fed funds futures and shifted demand slightly away from safe-haven assets, a large miss in the upcoming data could bring the case back on the table. It is the lowest level in almost five months and further evidence that the labor market remains strong.

According to data released by the government's statistics wing, the rate of industrial production, as reflected by the Index of Industrial Production (IIP), came in at 4.3 per cent in July as against 1.1 per cent in June and 6.5 per cent in July past year. Food prices were unchanged for the third straight month. They were driven by a 1.4 per cent surge in the price of hospital services, which was also the biggest increase since August 2016. Clothing costs, which had posted a big jump in June, edged up 0.2% in August.

Meanwhile, the retail inflation on health was 7.84 per cent, recreation and amusement at 5.54 per cent and personal care at 6.38 per cent. The cost of new vehicles and household furnishings fell.

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