Core Economy Alert: Wholesale Inflation Surges 8 Consecutive Months as Fuel Price Jumps amid New PPI Release

Core Economy Alert: Wholesale Inflation Surges 8 Consecutive Months as Fuel Price Jumps amid New PPI Release​

India’s wholesale inflation experienced a sharp surge in May, registering at 9.68 percent. This significant jump is up from the previous reading of 8.26 percent reported in April. The rise signals mounting pipeline inflation pressures across the economy and marks the eighth consecutive monthly increase in the sector.

The revised data, which utilizes the government’s newly established series based on a 2022-23 base year, indicates that fuel prices remain the principal driver of this inflationary trend. This continued pressure reflects persistent global commodity movements and geopolitical tensions affecting West Asia.

Fuel and Mineral Inflation Drives WPI Surge​

The fuel and power segment saw inflation accelerate dramatically to 30.33 percent in May from 24.89 percent in April. Mineral oils, for example, recorded a massive increase, with their inflation rate climbing to 49.82 percent from 40.74 percent.

Crude petroleum and natural gas witnessed even sharper acceleration, rising to 61.51 percent from 56.31 percent. This intense movement in energy costs is intensifying the risk of imported inflation filtering down into domestic supply chains.

Manufacturing and Food Costs Rise Amid Input Pressure​

Inflation related to manufactured products also showed a notable ascent, reaching 7.48 percent in May compared to 6.68 percent in April. This indicates that input cost pressures are now broadening well beyond the energy sector.

Various essential industrial sectors saw inflation rise. Chemicals and chemical products were particularly affected, with inflation hitting 13.40 percent. Basic metals recorded a parallel increase of 12.30 percent, while electrical equipment saw its rate climb to 11.32 percent.

The food segment at the wholesale level also continued to appreciate, with the WPI food index moving to 4.49 percent from 3.11 percent. Manufactured food products accelerated sharply to 6.14 percent from 4.53 percent, suggesting that raw material price pressures are successfully passing through to processed goods.

Services Inflation Remains Contained as Goods Costs Surge​

In contrast to the sharp increases seen in commodities and manufactured goods, services inflation remains relatively contained. This divergence suggests that the current inflationary shock is primarily supply-side driven rather than a broad increase in consumer demand.

The Securities Transaction Service Price Index registered a 2.8 percent increase quarter-on-quarter. However, other service categories showed mixed results. Railway passenger services rose by 2.2 percent, while banking service prices declined by 1.3 percent.

Producer Price Index Released for Manufactured Goods​

Producers price index or PPI inflation for manufactured goods was reported as flat in May. This release marks the initial instance of the government issuing these specific PPI numbers. Going forward, the government intends to release both input and output PPI data on a trial basis to provide deeper market insights.

The overall picture suggests that rising fuel and commodity costs pose a potential spillover risk into retail inflation, especially if producers continue to pass along higher input costs throughout the supply chain.