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Asia Economics Special: India: WPI inflation eases to 7.5%; RBI to pause
temporarily [Taimur Baig]
India's WPI inflation eased to 7.5% in November (from 8.6% in October). The
September figure was revised up to 8.9% from 8.6%. At a first glance, the
developments look promising: food (9.4%yoy vs. 14.1%yoy) and primary articles
(13.0% vs. 16.7%) inflation eased considerably, and fuel price inflation declined as
well (10.3% vs. 11.0%). Manufactured goods inflation rose by 0.3%mom
(4.6%yoy). Once the data is adjusted for seasonality and base effect, however, the
trend looks worrisome. The WPI rose by 0.8%mom, SA, which implies inflation
running at close to 10%. More strikingly, inflation momentum has been rising in
recent months, and the weekly trend of prices reveals a sustained rise of a broad
range of prices.
India Economics Weekly: Economics [Taimur Baig]
We see India entering 2011 with a great deal of interest and goodwill from the
investor world. The country's favourable growth story is well known, and
expectations are for sustained high returns in the short and medium term. We see
ingredients in place for another high growth year, but remain concerned about the
supply/demand dynamic with respect to inflation. We have also reduced our
expectation of major reform initiatives or legislative achievements in the coming
year due to a likely rise in political noise.
Asia Economics Daily: Strong IP growth in India [Kaushik Das]
Given the sharp rebound in October PMI and core infrastructure data, it was
reasonable to expect a sizeable bounce in industrial production for the month,
coming on the heels of a growth rate of just 4.4%yoy in September. Nevertheless,
the 10.8%yoy (1.8%mom) growth rate reported in today's data was higher than
our forecast of 8.5%. The higher-than-expected figure reflected across the board
strength among the key components of industrial production (mining:
+10.9%mom, +6.5%yoy, manufacturing: +0.5%mom, 11.3%yoy, electricity:
+9%mom, +8.8%yoy).
US Daily Economic Notes: H2 real GDP profile looking sturdier on key data
revisions [Joseph LaVorgna]
Data since last Friday have caused us to revise back up our forecast for the current
quarter. It also appears that Q3 real GDP, last reported at 2.5%, will be revised
higher, as well. Late last week we learned that the trade deficit in October fell
13% in the month. We believe some of this is due to faulty seasonal factors—the
trade deficit has shrunk in October in each of the past five years. However, this is
simply payback from earlier in the year, when net exports were probably artificially
depressing measured GDP growth.
The Investigator: 2011 – A confluence of positives [Ajay Kapur]
1) The economic cycle is inflecting up. 2) Don't fight the Fed and 3) Don't fight the
Tape at the same time. 4) The US Presidential cycle is supportive. 5) Consensus
Asia EPS growth estimates are too low. 6) Equity valuations look good versus the
alternatives. 7) De-equitization - A US/Europe concept that is supportive of global
equity multiples. Longer-term investors should have aggressively overweight
positions. For the short-term traders out there, US Risk-Love, i.e. sentiment, is at
extremely elevated levels, so we would close the books or wait a few weeks and
see Risk- Love drop slightly to scale in this bullish view for 2011.
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