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Retail inflation at 5-month high
Why in the news ?
- Retail inflation jumped to a five-month high of 5 per cent in June primarily driven by rise in prices across the non-food categories of housing and fuel and light.
Details
- Retail inflation, based on the Consumer Price Index, stood at 4.87% in May. It was 1.46% in June 2017. The earlier high was in January this year, at 5.07%.
- While crossing 5 per cent mark was along expected lines, economists expressed concerns about inflation even rising further in coming months in the wake of the recent hike in minimum support prices.
- In CPI, food and beverages inflation rate moderated to 3.18 per cent in June from 3.37 per cent in May and the Combined Food Price inflation for June also eased 2.91 per cent from 3.10 per cent in the preceding month.
- Inflation rate for other categories such as fuel and light spiked to 7.14 per cent in June, while that for housing inched higher to 8.45 per cent. Inflation for clothing and footwear rose to 5.67 per cent in June, data showed.
- Core-core inflation (excluding food, fuel & light and transport & communication) remained at over 6 per cent for the third month in a row.
Inflation
- Inflation is defined as a sustained increase in the general level of prices for goods and services in a county
- Demand-Pull Inflation– Inflation is caused by the overall increase in demand for goods and services, which bids up their prices.
- This theory can be summarized as "too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase.
- This usually occurs in rapidly growing economies. This theory is often promoted by the Keynesian school of economics.
- Cost-Push Inflation– Inflation is caused when companies' costs of production go up. When this happens, they need to increase prices to maintain their profit margins.
- Increased costs can include things such as wages, taxes, or increased costs of natural resources or imports.
- The Consumer Price Index (CPI)measures changes in the price level of a 'market basket' of consumer goods and services purchased by households.
- The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically.
Source
The Hindu, Investopedia.