Feb-25 WPI inflation up at 2.38% as manufacturing feels the heat

17 Mar 2025 , 03:03 PM

FEBRUARY WPI INFLATION BOUNCES TO 2.38%

After tapering marginally in January 2025, the WPI inflation bounced by 7 bps to 2.38%. However, the December 2024 WPI inflation was also revised up by 20 bps to 2.57%. While food products and fuel contributed to lowering WPI inflation, the pressure came from manufactured products, amidst the global tariff uncertainty.

Month	WPI Inflation (%)	CPI Inflation (%)
Jan-24	0.33%	5.10%
Feb-24	0.20%	5.09%
Mar-24	0.26%	4.85%
Apr-24	1.19%	4.83%
May-24	2.74%	4.80%
Jun-24	3.43%	5.08%
Jul-24	2.10%	3.60%
Aug-24	1.25%	3.65%
Sep-24	1.91%	5.49%
Oct-24	2.75%	6.21%
Nov-24	2.16%	5.48%
Dec-24	2.57%	5.22%
Jan-25	2.31%	4.26%
Feb-25	2.38%	3.61%

Data Source: Office of the Economic Advisor

One can attribute the marginal bounce in WPI inflation to the base effect, with the WPI inflation easing by 13 bps to 0.20% in the year ago period. However, the break-up of the WPI inflation spike is more interesting. While there was a clear tapering in food inflation and fuel inflation, the pressure came entirely from manufactured products.

That is not surprising, considering that global tariff uncertainty is hitting manufacturing hardest. A more illustrative picture can be seen in the cumulative 11-month inflation for FY25, which now stands at 2.25% versus -0.82% in the corresponding 11 months of FY24.

READING WPI INFLATION 11-MONTH TREND?

Let us look at smoothened WPI inflation on a cumulative 11-month basis for FY25.

• The headline WPI inflation for FY25 stood at 2.25%, compared to -0.82% in comparable 11 months of FY24. This is due to the fact that in fiscal year FY24, 8 out of the 12 months had reported contraction in WPI.
• The primary articles WPI for FY25 at 5.54% is sharply higher than the corresponding FY24 figure of 3.44%. This has been triggered by food basket WPI inflation surging from 6.57% last year to 7.83% in FY25. Minerals inflation actually tapered in FY25 by 291 bps.
• Let us turn to the Energy Basket. This basket saw WPI inflation hardening from -4.87% to -1.52%; albeit still in contraction mode. The pressure came from a spike in LPG and high speed diesel (HSD) prices in FY25.
• What about manufacturing basket with 64.23% weightage? As supply chains normalized, manufactured products inflation for FY25 turned around to 1.58% from -1.76% in FY24. This has triggered higher input costs and thinner OPMs for Indian corporates.

The pressure on the manufacturing basket is fairly pronounced in Jan-Feb 2025.

WPI INFLATION SHIFTS: YOY AND MOM

Let us first look at how the WPI inflation basket across primary products, fuel & power, and manufacturing products shifted in last 3 months. This inflation is year-on-year.

Commodity Set	Weight	Feb-25 WPI	Jan-25 WPI	Dec-24 WPI
Primary Articles	0.2262	2.81%	4.69%	6.02%
Fuel & Power	0.1315	-0.71%	-2.78%	-2.57%
Manufactured Products	0.6423	2.86%	2.51%	2.14%
WPI Inflation	1.0000	2.38%	2.31%	2.57%
Food Basket	0.2438	5.94%	7.47%	8.95%

Data Source: Office of the Economic Advisor

Here are some key observations. While the food basket has tapered in the month of February, the pressure has once again come from the manufacturing basket. Fuel & Power has hardened compared to last month, but is still in contraction mode. However, with Brent Crude at $70/bbl, this should soften further. Let us turn to the high frequency MOM data.

Commodity Set	Weight	Feb-25 WPI	Jan-25 WPI	Dec-24 WPI
Primary Articles	0.2262	-1.74%	-2.01%	-2.07%
Fuel & Power	0.1315	2.12%	-0.79%	1.27%
Manufactured Products	0.6423	0.42%	0.14%	-0.07%
WPI Inflation	1.0000	0.06%	-0.64%	-0.45%
Food Basket	0.2438	-1.25%	-2.35%	-2.10%

Data Source: Office of the Economic Advisor

The short term pressures is essentially coming predominantly from manufacturing and fuel, although it is manufacturing that appears to be a stickier high-frequency problem.

WPI BASKET – BIG SWING FACTORS IN FEBRUARY 2025

Swing factor are drivers that trigger the shift in WPI. The left hand side (LHS) looks at positive drivers; while right hand side (RHS) looks at negative drivers for WPI (product-wise).

Commodity	WPI Inflation	Commodity	WPI Inflation
Onions	48.05%	Crude Petroleum	-7.99%
Vegetable Oil	33.59%	Vegetables	-5.80%
Potato	27.54%	Crude & Natural Gas	-4.06%
Fruits	20.88%	Petrol	-4.21%
Food Products	11.06%	Cement, Lime & Plaster	-3.67%
Wheat	9.58%	High Speed Diesel (HSD)	-3.20%
Cereals	6.77%	Pulses	-1.04%
Paddy	5.17%	Fabricated Metal Products	-1.02%
Tobacco Products	2.74%	Non-metallic Minerals	-0.90%
Paper Products	2.10%	Basic Metals	-0.65%

Data Source: Office of the Economic Advisor

Most of the upward pressure on WPI inflation is still coming from food product basket; actually 8 out of the 10 swing products. Among others, there is tobacco products and paper products. However, the WPI inflation depressants are more interesting. 4 out of the 10 inflation depressants are from the fuel & energy segment, while 2 are from the food basket. Manufacturing, which used to once play a big part in bringing down inflation, is moving to the other side. That is the key takeaway.

WHAT WE READ FROM WPI DATA FOR FEBRUARY 2025

There are some early signals coming out of the WPI data. One sense is that the WPI data is diverging from the CPI inflation data. For instance, the CPI inflation has been on a steady downtrend in the last few months, but the opposite appears to be the case with WPI. One reason is that CPI is dominated by the food basket, and that is seeing lower prices. However, when WPI manufacturing inflation goes up, it normally translates into higher core CPI inflation. That is what we have to watch out, and be wary of!