Both Jun-21 CPI inflation and May-21 IIP came in line with our expectations. CPI inflation shrugged off lockdown blues as easing of supply disruptions allowed sequential price momentum to record a broad-based cooling off
Download ReportMay-21 IIP/Jun-21 CPI Inflation: Yo-yoing between growth and inflation risks
Both Jun-21 CPI inflation and May-21 IIP came in line with our expectations. CPI inflation shrugged off lockdown blues as easing of supply disruptions allowed sequential price momentum to record a broad-based cooling off. However, an unfavourable base precluded any respite on headline reading vs. May-21, with headline and core inflation both remaining above 6.0% for the second consecutive month in Jun-21. On growth, the sequential weakness in economic activity as validated by May-21 IIP, after giving way to a burst of recovery in Jun-21 appears to be sobering down in Jul-21 as per high frequency lead indicators. This growth-inflation flux will allow the RBI to continue to focus on reviving growth for now, but not without acknowledging the up-move in FY22 inflation trajectory post May-21 reset and given that inflation risks are not off the table.