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December Inflation at 8.43%, Sounds Too Low

The latest release says the December 2010 overall inflation is at 8.43%. Interestingly, manufactured goods saw only a 4.46% inflation, but Fuel saw 11.19% and Primary Articles saw 16.46%.

December Inflation at 8.43%

That is surprisingly benign for manufactured goods, and obviously that will bring down overall inflation; manufactured goods has a 65% weight in the overall index! This doesn’t smell right, though.

Here’s the three year chart for how the inflation components move:

Inflation Components

There’s a problem with manufactured goods data here – but it’s possible if we increase the weights of TVs, Laptops and Mobile phones, of course. This needs a relook and some data crunching.

Oh and the great revision cycle is back. October Inflation, now revised:

For the month of October, 2010 the final Wholesale Price Index for ‘All Commodities’ (Base: 2004-05=100) stood at 142.4 as compared to 141.7 (Provisional) and annual rate of inflation based on final index stood at 9.12 percent as compared to 8.58 percent (Provisional) reported on 15.11.2010