| EcoScope |
|
| July 2012 IIP growth at 0.1%; widespread slowdown |
| 12-Sep-2012 |
Cutting FY13 IIP growth to 1.4%; Expect rate cuts
- Jul-12 IIP growth barely remained in positive territory (0.1%). This is much lower than expected, partly due to the electricity blackout during the month.
- Widespread slowdown was observed at the sub-sector level. De-growth in mining dragged the rest of the industrial value chain. Manufacturing too remained negative as only 8 out of 22 sub-groups registered any positive growth.
- The use-based classification confirmed the widespread slowdown view. Basic goods saw significant slowdown; while de-growth in Capital goods moderated, Intermediate goods dived into negative territory again after two consecutive months of positive growth.
- The Consumer sector showed first signs of cracking with very low growth in both durables and non-durables.
- The difference between IIP and IIP ex-capital goods reduced in Jul-12 to merely 0.7% v/s 4.7% in Jun-12 again confirming the widespread slowdown.
- YTDFY13 IIP too indicated near static level of industrial production, down 0.1%. This contrasts starkly with 6.1% growth registered during YTDFY12.
- Accounting for the widespread slowdown we have downgraded our FY13 IIP growth projection to 1.4% now from 2.9% earlier. However, we have kept our GDP growth estimate unchanged at 5.8% for the time being as the late recovery in monsoon points to agriculture playing a compensatory role.
- The current IIP reading is another pointer that growth continues to moderate rapidly while inflation has seen some easing (albeit some pressure points remain). Thus, we would expect RBI to resume easing of monetary policy with a 25bp rate cut in its September 17 policy.
|
|
|
|
|
|
|
|
|
|