- Wealth PMS
Wholesale Price Index (WPI) showed inflation of 4.86% today, while everyone was left wondering what the government is smoking and if they could get any of it.
While some of this is the base effect, the difference between the Consumer Price Inflation (Came in at 9.87%) and the WPI inflation is now over 5%.
One conspiracy theory is that the WPI inflation is what is used to deflate the GDP growth – so a lower WPI helps the government show reasonable growth. At about 5% GDP growth (net of WPI inflation) it seems like if you now use CPI to deflate the GDP, we will have zero growth.
The components give you some idea of where the lack of inflation is:
Yes, manufactured goods (which has 75% weight in the index) has only 2.75% inflation. It’s the government! If it says we have 4.86% inflation, that’s what we have!
Meanwhile, April figures have been revised downwards, to 4.77% from a first reported 4.89%. Unsure what to make of that too.