Retail inflation reached a four-month high of 5.1% year-on-year (YoY) in June 2024, up from 4.8% in May and 4.9% in June 2023. This uptick is primarily driven by a notable rise in food inflation, which hit a six-month peak. Despite core inflation remaining at a record low and fuel prices continuing to deflate, the overall Consumer Price Index (CPI) saw an increase. In the first quarter of FY25, CPI inflation averaged 4.9%, slightly surpassing the Reserve Bank of India’s (RBI) forecast of 4.5%.
Food Inflation: The Main Driver
Food inflation surged to 8.4% in June, a significant jump from 7.9% in May and 4.7% a year ago. This spike is largely due to steep increases in prices for vegetables, pulses, and cereals. Key items like tomatoes (up 26.4% YoY), onions (58.5% YoY), and potatoes (57.6% YoY) have experienced sharp price hikes. Extreme heat and a poor monsoon have diminished crop yields, exacerbating these price increases. Fruit inflation also rose to a five-month high of 7.2% YoY, while oils and fats continued their 17-month streak of deflation, albeit at a slower rate.
Core Inflation Trends
Core inflation remained steady at 3.1%, matching the previous month and down from 5.1% last year. Although inflation for personal care items reached a nine-month high of 8.2% due to rising gold and silver prices, other sub-components, such as housing and clothing, saw minimal changes. Housing inflation edged up slightly to 2.7%, while clothing and footwear inflation fell to a four-year low of 2.7%.
Wholesale Price Index (WPI) Trends
Wholesale inflation accelerated to a 16-month high of 3.4% YoY in June, up from 2.6% in May. This increase is partly attributed to a low base effect from June 2023 and double-digit inflation in food articles. However, tepid inflation in fuel and manufacturing sectors partly moderated this rise. The manufacturing segment saw its first positive inflation in 15 months, rising to 1.4% YoY. Food products within manufacturing grew by 4.3% due to a low base effect, while inflation in basic metals and chemicals remained subdued. Crude petroleum and natural gas inflation spiked to a nine-month high of 12.6% YoY, driven by a low base effect.
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