Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Charts & Analysis

WPI Inflation at a head-turning 5.96%, but unnoticed is Jan Inflation Whopping Revision to 7.3%

Inflation in the Wholesale Price Index (WPI) came in at a headline number of 5.96% for March 2013, which not just raises eyebrows but brings the words Whisky Tango Foxtrot into mainstream vocabulary.

WPI Inflation for March 2013 chart

What you don’t see here is that

Inflation for Jan 2013 has been revised UP from 6.6% to 7.3%.

This is the biggest revision since, surprise, March 2012! (which was revised up by 0.80%)

The inflation number for Jan 2013 was first announced as 6.62%. Now it’s gone up to 7.3%. In Jan, we thought Inflation has come down since December. Not true, it’s now revised to the same level as December!

Essentially, the first number that went under 7%, didn’t.

inflation revisions

Of course, if you look at components the data seems serious bonkers:

Inflation Components

While Fuel inflation has remained high (10%+) Primary articles – mainly food – is down from 11% to 7.6%. This is ludicrous, because the CPI number (consumer prices) showed food prices at the retail level were up 12%+. The “spread” is not that much, senor.

CPI Components

I’m almost definite that this 5.96% number will be revised sharply upwards. Effectively I have no confidence in this number.

Bond markets don’t seem to be pleased as the 10 year bond yield has moved up quietly from 7.82% in the morning to about 7.84%.

If RBI actually chooses to believe this data, it will cut rates. Given the fall in crude and gold, it might just do so anyhow. Yet, I’d take this 5.96% with a pinch of salt. Which, by the way, is up 2% from last year.

  • Sarang says:

    Hi Deepak,
    In many of your posts you inform about revisions in the numbers of inflation, IIP etc. and I am sure the revisions are done more often than you get a chance to post about them 🙂
    Any idea if there is any legitimate reason for these revisions (at least on paper!) or on each occasion the revision is done under the pretext of “Oops! we miscalculated last time!”?
    – Sarang

    • Revisions are announced every release…and I do post about them each time 🙂 Revisions are usually because some price data is delayed or made available after the first release. I believe the revisions incorporate more useful data than the first announcements, but then no one else seems to care 🙂

  • piyush says:

    Revisions are announced with a lag of 2 months. So while main number was for March, revisions were for Jan.
    Deepak, the massive January revision was due to Statisticians finally deciding on how to tackle the problem of having two prices for LPG as well as diesel – subsidized prices and normal prices.
    I think there were a articles regarding this in various media.

    • Piyush, thanks. The LPG price change resulted in only 0.2% of the 0.63% change in Jan. The rest came from Diesel (0.19%) and Primary articles (0.13%) among others. At the wholesale level, diesel prices never had any question (wholesale “bulk” prices of diesel were at market rates only – so why do anything with subsidy at the wholesale price index level?) There are many such anomalies 0- like coal (price is always coal india’s annual contract, not the actual traded price of coal in markets)

      • piyush says:

        “We would however like to highlight that the c. 50% of the upward revision in the January print was driven by incorporation of correct prices of cooking gas and diesel in the January index. Since these revisions are already incorporated in the Feb. onwards WPI prints, the upward revisions for the Feb and March print is likely to be much lower, may be 30-40 bps. The story on core inflation still remains comfortable and this cements our call for another 25bps repo rate reduction in the May policy meeting.”
        ~ from a research report

        • I know about LPG. Diesel is suspect, because it was raised from 193 to 198, which is just a 2.5% increase (wholesale prices were up substantially more than that!). LPG wise, prices went up from 150 to 183, a 20% increase. Again, this is too less, because in effect, wholesale prices more than doubled. Eventually they will take that into consideration, and prices will have to be revised yet again.
          Core inflation will reflect higher in April as a lot of items in the “core” series change only once a year or so. Last April they didn’t bite much, but I believe this time they’ll have to.

        • piyush says:

          So, its not just about the quantum of price hike, but also what weight to give to each price. How much weight there should be for the wholesale prices and how much for the subsidized prices.

        • It’s a wholesale price index, mate. Not a retail one. So it should use only wholesale prices 🙂 We have a CPI for consumer prices.

  • Gaurav Raizada says:
    Please check this to understand how “sarkari” CSO is and how sad the condition of this country is.