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India December industrial production: A lower print again
The Industrial Production Index (IP) grew 1.6% yoy in December, below the revised 3.6% (from 2.7%) yoy growth
in November. The IP reading was largely in line with market consensus of 2.0% yoy and our expectations of 1.1%
yoy growth. Sequentially, IP rose 1.2 % mom, s.a. in December after being weak in November.
The lower print in December was mainly due to a high base from last year but also moderating activity. The volatile
Capital Goods Index continued to fall 4.1% mom after the decline of 7.3% mom in November. Consumer goods
increased by 6.2% mom after 8.6% mom fall in the previous month, driven by a significant recovery in durable
goods growth in December. Durable goods grew at 16.7% mom, after the 7.9% mom decline in November.
Consumer non-durables sequentially rose 2.6% mom after the fall of 4.9% mom in November.
Lower IP data from the past two months show that activity is moderating. In particular, capital goods growth has
been weak suggesting a soft patch in investment activity. This is also borne out by infrastructure companies
reporting a slowdown in execution. Other co-incident indicators, however, such as the PMI, motor vehicle sales, tax
revenue growth prevent us from concluding that there is a sharp decline in activity. Our FY11 GDP growth forecast
of 8.5% incorporates a significantly weaker second half of the year. The government's advance estimates of GDP
came in at 8.6% yoy, in line with our expectations.
For activity in FY12 our thinking is that the current softer patch in infrastructure is temporary in nature, driven by
policy drift, and may reverse itself. We do not think that real interest rates are high enough yet to warrant a sharp
slowdown in demand. That said, risks to our 8.7% GDP forecast are firmly to the downside.
We expect the Reserve Bank of India (RBI) to hike policy rates by 25 bp in the March 17, 2011 meeting. Beyond
that, we believe the RBI will hike policy rates by another 50 bp in calendar year 2011. WPI inflation numbers for
January will be released on February 14, and we expect it to come in at 8% yoy
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India December industrial production: A lower print again
The Industrial Production Index (IP) grew 1.6% yoy in December, below the revised 3.6% (from 2.7%) yoy growth
in November. The IP reading was largely in line with market consensus of 2.0% yoy and our expectations of 1.1%
yoy growth. Sequentially, IP rose 1.2 % mom, s.a. in December after being weak in November.
The lower print in December was mainly due to a high base from last year but also moderating activity. The volatile
Capital Goods Index continued to fall 4.1% mom after the decline of 7.3% mom in November. Consumer goods
increased by 6.2% mom after 8.6% mom fall in the previous month, driven by a significant recovery in durable
goods growth in December. Durable goods grew at 16.7% mom, after the 7.9% mom decline in November.
Consumer non-durables sequentially rose 2.6% mom after the fall of 4.9% mom in November.
Lower IP data from the past two months show that activity is moderating. In particular, capital goods growth has
been weak suggesting a soft patch in investment activity. This is also borne out by infrastructure companies
reporting a slowdown in execution. Other co-incident indicators, however, such as the PMI, motor vehicle sales, tax
revenue growth prevent us from concluding that there is a sharp decline in activity. Our FY11 GDP growth forecast
of 8.5% incorporates a significantly weaker second half of the year. The government's advance estimates of GDP
came in at 8.6% yoy, in line with our expectations.
For activity in FY12 our thinking is that the current softer patch in infrastructure is temporary in nature, driven by
policy drift, and may reverse itself. We do not think that real interest rates are high enough yet to warrant a sharp
slowdown in demand. That said, risks to our 8.7% GDP forecast are firmly to the downside.
We expect the Reserve Bank of India (RBI) to hike policy rates by 25 bp in the March 17, 2011 meeting. Beyond
that, we believe the RBI will hike policy rates by another 50 bp in calendar year 2011. WPI inflation numbers for
January will be released on February 14, and we expect it to come in at 8% yoy
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