Manufacturing Drives December Surge in Wholesale Inflation: ICICI Bank Report

A report from ICICI Bank reveals a surge in December's wholesale inflation, driven by manufacturing inflation reaching a 23-month high. Out of 22 sub-components, 18 recorded positive inflation. Rising crude oil and industrial metal prices could further exacerbate inflationary pressures in the coming months.

According to a report from ICICI Bank, the country experienced a noticeable surge in wholesale inflation during December, primarily due to a rise in manufacturing inflation. The report indicated that inflation in manufactured products rose to a 23-month high of 2.14 percent year-on-year in December. This increase was observed across 18 of the 22 manufacturing sub-components, with only three categories recording negative inflation. Additionally, the Core Wholesale Price Index (WPI), which excludes volatile food and fuel prices, also experienced a slight uptick to 0.65 percent year-on-year.

The report further highlighted that wholesale inflation was prominently influenced by manufacturing, with December marking the third consecutive month of manufactured food inflation exceeding 9 percent. Manufactured food inflation reached a 32-month high of 9.7 percent year-on-year. The overall WPI inflation for December rose to 2.37 percent year-on-year, surpassing market expectations of 2.18 percent, and marking a significant increase from November 2024's rate of 1.89 percent.

Conversely, the lowest inflation rates were noted in non-metallic mineral products, basic metals, and fabricated metal products. The decline in non-metallic mineral products was primarily driven by cement, which recorded negative inflation of -6.8 percent year-on-year. In the basic metals category, factors contributing to the decline included inputs for steelmaking, steel products, and metallic iron.

The report also cautioned about potential upward inflationary pressures in the coming months. Anticipated higher international crude oil prices, driven by intensified sanctions on Russia, along with a rise in industrial metal prices in January, could further increase WPI inflation. The report stated that these factors could pose an upside risk to inflation.

The average wholesale inflation for the April-December period of FY25 stands at 2.18 percent, starkly contrasting with the -1.04 percent recorded during the same timeframe in FY24. This shift underscores the growing inflationary pressures driven largely by rising manufacturing costs in the economy.

(With inputs from agencies.)