Published: Wed, January 13, 2021
Economy | By

Industrial production contracts 1.9 per cent in November

Industrial production contracts 1.9 per cent in November

USA consumer prices increased in December, with households paying more for gasoline, though underlying inflation remained tame as the economy battled a raging COVID-19 pandemic, which has weighed on the labor market and the services industry.

A key measure of prices paid by U.S. consumers cooled in December from a month earlier as slack in the labour market and muted demand helped keep inflation pressures tame. While retail inflation for December came down to within the Reserve Bank of India's (RBI's) medium-term inflation target after eight months, industrial production in November contracted after two months of expansion. Vegetable prices fell 10.41 per cent, while cereals rose just 0.98 per cent.

India's index of industrial production (IIP) for November was dragged lower by mining and manufacturing, which both shrank, as per quick estimates. Core inflation - which excludes food and fuel costs - was estimated at around 5.70 per cent for the month. Even during the high inflation years of 2012 and 2013, inflation in this segment had not crossed 20 per cent. Oils and fats have rarely displayed such a high inflation. Milk and dairy products saw prices rise 3.98 per cent. Fruit prices grew only 2.68 per cent in December, whereas pulses and associated products got dearer by 15.98 per cent.

Sunil Kumar Sinha, principal economist, India Ratings & Research, said the higher core inflation was not driven by demand factors despite the economy recovering from the lows of the first quarter.

"However, the good part is that it has declined marginally in November 2020. Overall, we expect inflation to average between 5-6 per cent in CY21", he further added.

"The statistical advantage of a markedly favourable base, that has now kicked in, will also help the headline CPI prints over the current quarter".

"It's after April 2020 that inflation has come in between RBI's target range of 2 per cent - 6 per cent". However, this was the only section that saw a decline in prices last month. "The focus is now being oriented towards supporting the recovery and preserving the solvency of businesses and households", RBI said in a report released on Monday.

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