Quickonomics: Input costs on fire

The West Asia conflict has sparked the largest oil shock the world has seen so far. The closure of the Strait of Hormuz has only broadened the shock to other input categories even as manufacturers are already grappling with higher costs from critical inputs such as copper and aluminium.

Crisil’s input-output ratio¹, based on the Wholesale Price Index (WPI), crossed the 1.0 mark in April after remaining below it for 44 straight months.

The ratio stood at 1.02, driven by an 6.2% on-month rise in input prices, while output prices increased a modest 0.7%.

¹Input and output indices are computed from the WPI using supply use tables for 2023-24. We estimate ~59% of the WPI sub-components to be classified as inputs.