Cheaper oil, steel unlikely to lead to low consumer goods prices

Prices of consumer goods such as cars, washing machines, soaps and shampoos may not fall sharply in the coming days following the recent drop in input costs, but companies will use the prevailing soft price regime to push promotional schemes and gain market share.

Crude oil, which accounts for a major part of the production and freight costs of most goods, fell sharply in global markets to $81-82 a barrel, as West Asiabased oil-producing countries said they may have to reduce shipments to the US, one of the world’s largest consumers. The price of the commodity has eroded sharply since November 2001, and is likely to fall further.

The drop in oil prices has already pushed down India’s infla- tion rates, with the consumer price index-based or retail inflation — an indicator of shop-end prices — growing at 6.46% in September, the lowest in three years.

This has softened prices of palm oil, a key raw material used for making soaps and other daily consumer items. Hindustan Unilever, India’s largest fast-moving consumer goods company and a market leader in toilet soaps, expects benefits to build slowly.

“From the costs perspective we should start to see benefits of falling commodity prices in the coming quarters,” chief financial officer PB Balaji said.

A similar stance has been adopted by steel companies who make and sell consumer grade or flat steel. The metal is used for making cars and consumer goods such as washing machines and refrigerators.