In this edition of This Week In Data, we discuss:

Inflation picks up, but remains contained
Wage growth is decelerating, especially in rural areas
Oil prices have stabilised at much below April levels
Exports saw strong growth in July, led by Oil and Electronics
Regionally Singapore and China are seeing strong growth in exports
Imports also saw strong growth driven again by Oil and Electronics
FX Reserves are back above US$700bn

Inflation ticked up 4.4% YoY in July from 4.3% YoY in June. The uptick was entirely due to higher food prices. Food inflation rose 20bps to 5.2% YoY in July. Non-food inflation was stable at below 4% (~3.9%). Non-food inflation has remained below 4% for several months now. There is thus as yet no widespread increase in inflation despite the higher commodity prices. This is partly explained by still muted wage growth, which is a bigger structural driver of inflation than commodity prices.

Rural wage growth has remained in mid-single digits for the last several months now. Indeed, wage growth has trended down in recent months. For males, for example, the average daily wage rate in rural India has moderated to 3.6% YoY in June, the lowest in the last few years. For women, wage growth is slightly higher but has nevertheless moderated to the lowest since early 2022 as of June.

Oil prices have stabilised in the mid-80s in recent weeks. The price of the Indian basket of crude oil has averaged $88/bbl so far in August, slightly above the US$82-83 average in June and July but substantially lower than the peak of $114/bbl in April. So while oil prices remain elevated, they are substantially below the 2Q peak, and this is part of the reason cost-push has not been much higher.

Merchandise exports rose 20% YoY in July, the strongest growth in recent months. This was driven by an almost 70% YoY growth in exports of Petroleum products and a near 60% YoY growth in exports of Electronics goods. Exports of Engineering goods and Chemicals also grew in the mid to high teens.

Regionally, exports to China and Singapore have seen strong growth this year. Exports to China grew 65% YoY in July and have grown by 36% YoY so far this year (Apr – Jul). Exports to Singapore grew over 80% YoY in July and have almost doubled YoY in the first 4 months of the year. This is partly explained by the increase in petroleum exports, reflecting higher oil prices, as Singapore is a major Oil & Gas and Petrochemicals hub. Singapore is the third-largest export destination market for India so far this year. The other large export markets for India have either seen single-digit growth or even a decline (UAE, Netherlands) so far this year.

Imports also grew strongly – almost 18% YoY in July. And Petroleum and Electronic goods were the key contributors to the strong growth in imports as well. Almost 2/3rds of incremental growth came from these two categories. Electronic goods saw just under 50% YoY growth in imports, while Petroleum products saw 18% growth in imports. Machinery & Machine Tools is the other large category that saw double-digit growth. Most other large categories saw subdued growth.

Lastly, India’s FX Reserves rose by US$15bn in the first week of August, reaching US$707bn. Since the launch of the FCNR scheme, which raised a total of US$57bn, foreign currency assets increased by a total of US$31bn. The increase in total reserves was slightly lower due to MTM losses on gold. But in absolute terms, FX reserves are back above US$700bn and are at their highest level since May this year and higher on a YoY basis.

That’s it for this week. See you next week…

This Week In Data

Decelerating Wage Growth, Recovery in Exports…