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New IP Index – More Representative of Underlying Growth Trend
New IP index with 2004-05 base year launched: The
Ministry of Statistics today released the new Industrial
production (IP) index with base year revised from F1994
to F2005. The new series (F2005 base) takes into
account the item basket as per more recent production
behavior and thus can be considered to be a much
closer reflection of the present industrial scenario. The
Ministry has indicated that they will be releasing the IP
growth as per old and new index for the next two months,
but considering that the two series of IP contain different
item baskets and different weights, the respective
growth rates computed are likely to be different.
Industrial production (IP) growth decelerated to
6.3% in April 2011 as per new index: IP growth
decelerated to 6.3% in April compared with growth of
8.8%YoY in March and 6.5%YoY in February 2011. On
a seasonally adjusted sequential basis, the IP index was
down 1.5% MoM (vs. +2.7% MoM in March). On a
3MMA basis, IP growth decelerated to an average of
7.2%YoY during the three-months ended April 2011
from 7.6% during the quarter ended March 2011. For full
year F2011 (year-end March), IP growth (average)
stood at 8.2% YoY vs. 5.3% YoY in F2010.
Industrial production (IP) growth decelerated to
4.4% in April 2011 as per old index: As per F1994
base, IP growth decelerated to 4.4% in April compared
with growth of 7.8%YoY in March (revised upwards from
7.3%) and 3.7%YoY in February 2011. For full year
F2011 (year-end March), IP growth (average) stood at
7.8% YoY vs. 10.5% YoY in F2010.
Manufacturing growth decelerated in April as per
new index: In the manufacturing segment, growth
decelerated to 6.9%YoY (vs. 10.4%YoY in March)
Within manufacturing, accounting & computing machinery has
shown the highest growth of 96.5%, followed by motor vehicles,
trailers & semi-trailers (22.9%) and fabricated metal products,
except machinery & equipment (22.3%). On the other hand,
furniture manufacturing n.e.c. has declined by 15% followed
by wood & products of wood & cork except furniture, and
articles of straw & plating materials (-13.5%). While growth in
the mining segment picked up to 2.2%YoY (vs. 0.3%YoY in
March), it decelerated in the electricity segment to 6.4%YoY
(vs. 7.2%YoY in March).
Growth in consumer goods slowed sharply in April as per
new index: On the use-based classification, the consumer
goods growth slowed to 2.9%YoY in April 2011 compared with
11.7%YoY in the previous month. Within consumer goods,
durables and non-durables growth decelerated to 3.8% YoY
(partly on base effect) and 2.1%YoY (vs. 13.9% YoY and 9.9%
YoY in March), respectively. The capital goods segment grew
14.5%YoY in April compared to 15.4%YoY in the previous
month. The growth was driven by components, including heat
exchangers (130.9%), computers (115.2%), sugar machinery
(80.3%), textile machinery (55.2%) and boilers (51.2%).
Growth in intermediate and basic goods accelerated to
3.4%YoY and 7.3%YoY (vs. 1.9% YoY and 6.3% YoY in
March), respectively.
New Index series seems a more appropriate
representation of the underlying growth trend: As we have
been highlighting in our research earlier, we believe the new
index will help improve the quality of this data series, as the
monthly IP growth for the last few months (per the old base)
has been significantly underestimating underlying growth trend.
The new index (F2005 base) supports our expectation of IP
growth having been in the range of 6-9%YoY over the past
months, in line with the underlying growth trend, compared with
the 2-5%YoY range (except for March 2011 data point)
registered as per the old index (F1994 base).
Growth outlook – continue to see downside risks: We
expect GDP growth to decelerate to 7.7% in F2012 (year-end
April) from 8.5% in F2011. We expect government spending
and consumption growth to slow in 2011. We also expect
exports to remain strong, but not enough to offset slower
growth in domestic demand. However, considering that the
cost of capital may stay higher for longer, as well as continued
high global commodity prices, we see downside risks to our
growth outlook – to the extent of 0.5%pts.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
New IP Index – More Representative of Underlying Growth Trend
New IP index with 2004-05 base year launched: The
Ministry of Statistics today released the new Industrial
production (IP) index with base year revised from F1994
to F2005. The new series (F2005 base) takes into
account the item basket as per more recent production
behavior and thus can be considered to be a much
closer reflection of the present industrial scenario. The
Ministry has indicated that they will be releasing the IP
growth as per old and new index for the next two months,
but considering that the two series of IP contain different
item baskets and different weights, the respective
growth rates computed are likely to be different.
Industrial production (IP) growth decelerated to
6.3% in April 2011 as per new index: IP growth
decelerated to 6.3% in April compared with growth of
8.8%YoY in March and 6.5%YoY in February 2011. On
a seasonally adjusted sequential basis, the IP index was
down 1.5% MoM (vs. +2.7% MoM in March). On a
3MMA basis, IP growth decelerated to an average of
7.2%YoY during the three-months ended April 2011
from 7.6% during the quarter ended March 2011. For full
year F2011 (year-end March), IP growth (average)
stood at 8.2% YoY vs. 5.3% YoY in F2010.
Industrial production (IP) growth decelerated to
4.4% in April 2011 as per old index: As per F1994
base, IP growth decelerated to 4.4% in April compared
with growth of 7.8%YoY in March (revised upwards from
7.3%) and 3.7%YoY in February 2011. For full year
F2011 (year-end March), IP growth (average) stood at
7.8% YoY vs. 10.5% YoY in F2010.
Manufacturing growth decelerated in April as per
new index: In the manufacturing segment, growth
decelerated to 6.9%YoY (vs. 10.4%YoY in March)
Within manufacturing, accounting & computing machinery has
shown the highest growth of 96.5%, followed by motor vehicles,
trailers & semi-trailers (22.9%) and fabricated metal products,
except machinery & equipment (22.3%). On the other hand,
furniture manufacturing n.e.c. has declined by 15% followed
by wood & products of wood & cork except furniture, and
articles of straw & plating materials (-13.5%). While growth in
the mining segment picked up to 2.2%YoY (vs. 0.3%YoY in
March), it decelerated in the electricity segment to 6.4%YoY
(vs. 7.2%YoY in March).
Growth in consumer goods slowed sharply in April as per
new index: On the use-based classification, the consumer
goods growth slowed to 2.9%YoY in April 2011 compared with
11.7%YoY in the previous month. Within consumer goods,
durables and non-durables growth decelerated to 3.8% YoY
(partly on base effect) and 2.1%YoY (vs. 13.9% YoY and 9.9%
YoY in March), respectively. The capital goods segment grew
14.5%YoY in April compared to 15.4%YoY in the previous
month. The growth was driven by components, including heat
exchangers (130.9%), computers (115.2%), sugar machinery
(80.3%), textile machinery (55.2%) and boilers (51.2%).
Growth in intermediate and basic goods accelerated to
3.4%YoY and 7.3%YoY (vs. 1.9% YoY and 6.3% YoY in
March), respectively.
New Index series seems a more appropriate
representation of the underlying growth trend: As we have
been highlighting in our research earlier, we believe the new
index will help improve the quality of this data series, as the
monthly IP growth for the last few months (per the old base)
has been significantly underestimating underlying growth trend.
The new index (F2005 base) supports our expectation of IP
growth having been in the range of 6-9%YoY over the past
months, in line with the underlying growth trend, compared with
the 2-5%YoY range (except for March 2011 data point)
registered as per the old index (F1994 base).
Growth outlook – continue to see downside risks: We
expect GDP growth to decelerate to 7.7% in F2012 (year-end
April) from 8.5% in F2011. We expect government spending
and consumption growth to slow in 2011. We also expect
exports to remain strong, but not enough to offset slower
growth in domestic demand. However, considering that the
cost of capital may stay higher for longer, as well as continued
high global commodity prices, we see downside risks to our
growth outlook – to the extent of 0.5%pts.
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