Seasonally-adjusted inflation halves: Govt

The finance ministry has said inflation, adjusted for seasonal factors, halved this August over the previous month, indicating that price pressures in the economy have eased somewhat.

An analysis by the Department of Economic Affairs (DEA) says seasonally-adjusted inflation during August is provisionally estimated at 5.5 per cent, compared with 12.7 per cent in July and 29.5 per cent in June. This is the lowest annualised, seasonally-adjusted inflation since December 2007.

Seasonal factors play an important role in build-up of inflation and therefore de-seasonalised index is commonly used in assessing price movements in the immediate period. “What this really means is that after three months of a fairly high increase, inflation has halved. That is significant,” a senior finance ministry official said today. However, given the heavy fluctuation in seasonal factors, he felt it was too early to comment on the coming months.

The annual rate of headline inflation moderated to 12.1 per cent for the week ended August 30, much higher than 3.72 per cent in the corresponding week last year. However, on a week-on-week basis, inflation is moderating after hitting a 16-year high of 12.63 per cent in the first week of August.

The finance ministry official added that for some important consumer items, inflation in the current year remained low. Inflation for primary food articles stood at 4.6 per cent on August 30, lower than 7.1 per cent a year earlier.

In manufactured products also, inflation for cement (at 2 per cent in the current year, as against 12.9 per cent a year earlier) and machinery items (at 5.5 per cent in the current year compared with 8.7 per cent a year ago) remained lower.
 

52-week average inflation (in %)
	Sept 2, 2006	Sept 1, 2007	Aug 30, 2008
Primary articles	4.80	9.49	7.86
Fuel and power	8.67	1.70	6.76
Manufactured products	2.66	5.40	6.96
All commodities	4.44	5.46	7.12
Source: Department of Economic Affairs, Finance ministry

The annual rate of inflation is a cumulative impact of changes in prices over 52 weeks. Accordingly, the three broad groups of commodities indicate that while overall inflation is higher in the current year, inflation for primary articles is lower compared with the rates in 2007-08.