Normalisation of services demand behind falling 'core' inflation

THE SHARP FALL being recorded in core inflation, as per the Consumer Price Index, is largely a result of a decline in the inflation rate of services components, which were earlier at high levels, data analysed by FE showed. In October, core inflation was at a 43month low of 4.2%.

- PRIYANSH VERMA

As for the core CPI basket, which accounts for 47.3% of the overall basket, inflation rate of services components during October was at 3.6%, while that of the goods component was at 4.9%.

Both goods and services components roughly carry 50% weight each in the core CPI basket.

For the analysis, the inflation rates of all 38 services items of the CPI basket, collectively carrying a weight of 23.4% in overall index were considered.

And for goods components - all 121 items in the core segment with a weight of 23.9% were considered.

The 3.6% services inflation rate in October 2023 is substantially lower than the 5.6% rate recorded in October 2022.

It's also less than the 3.8% recorded in September and 4.8% in April.

For comparison, core goods inflation in October 2022 was at 6.2%, in September (5.1%) and in April (5.5%).