In July, retail inflation cooled slightly to 5.6%, falling below the central bank's tolerance limit of 6% for the first time in three months, although industrial production growth slowed to 28% in May, 6% to 13.6% in June, as a base. The impact of the national shutdown in 2020 has begun to fade.
Consumer-level food prices played an important role in slowing the pace of price increases in July. The National Bureau of Statistics (NSO) estimated an inflation rate of 3.96%, compared with June 5th and 15th. Inflation of vegetables, fruits, fats, beans, sugar and spices are all significantly moderate, which shows that some of the government's measures to adjust the prices of edible oil and beans are working.
Despite the respite, said Radhika Rao, an economist at DBS Group Research. According to the latest central bank survey, as inflation expectations further strengthen, potential pressure points still exist.
"Despite breaking away from the high level, since the end of 2019, driven by a series of difficult factors during and after the COVID19 incident, the inflation rate has been stubbornly maintained north of the 4% midpoint target. As states relax restrictions, inflation may shift from goods to services, and strong demand also encourages producers to pass on more and more input prices," she said.