New Delhi, January 15: The reason for the surge in wholesale inflation in the country in December is due to an increase in manufacturing inflation, according to a report by ICICI Bank.

Key Points
1. Manufacturing inflation reaches 23-month high at 2.14%
2. Core WPI edges up to 0.65% year-on-year
3. Manufactured food inflation climbs to 32-month peak of 9.7%

The report highlighted that inflation in manufactured products reached a 23-month high of 2.14 per cent YoY in December. Out of 22 manufacturing sub-components, 18 recorded positive inflation, while only three categories reported negative inflation. Core WPI, which excludes volatile food and fuel prices, also edged up slightly to 0.65 per cent YoY.

The report said, "Wholesale inflation rises led by manufacturing, December marks the third consecutive month of 9 per cent+ manufactured food inflation. Manufactured food inflation is now at a 32-month high of 9.7 per cent YoY".

The Wholesale Price Index (WPI) inflation rose to 2.37 per cent year-on-year (YoY), higher than market estimates of 2.18 per cent. This marks a significant jump from November 2024's WPI inflation of 1.89 per cent.

On the other hand, the report pointed out that the lowest inflation levels were observed in non-metallic mineral products (-3.0 per cent YoY), basic metals (-1.4 per cent YoY), and fabricated metal products (-1.3 per cent YoY).

Within non-metallic mineral products, the decline was mainly due to cement, which recorded negative inflation of -6.8 per cent YoY. In the basic metals category, inputs for steelmaking, steel products, and metallic iron contributed significantly to the decline.

The report also warned of potential upward risks to inflation in the coming months. Higher international crude oil prices, driven by tightening sanctions on Russia, and an increase in industrial metal prices in January, could further push WPI inflation higher.

It said, "Higher international crude oil prices due to tightening sanctions on Russia and higher industrial metals prices in January could pose an upside risk to WPI inflation".

The average wholesale inflation during the April-December period of FY25 stands at 2.18 per cent, a stark contrast to the -1.04 per cent recorded during the same period in FY24. This highlighted the growing inflationary pressures in the economy, primarily led by rising manufacturing costs.