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IIP growth slows to two-year low at 1.9% in September 2011
India’s industrial output grew at its slowest pace in two years in September 2011.
Industrial production grew by muted 1.9% yoy, well below Bloomberg’s survey
forecast of 3.5% and the downwardly revised 3.6% growth registered in August
2011. The 12-month rolling IIP growth has been on a declining trend since
November 2010, down from 9.9% in November 2010 to 6.7% as of August 2011.
Even YTD growth has moderated to just 5.0% from 8.2% in the corresponding
period last year.
Growth in manufacturing production, which accounts for ~75% of the industrial
production, moderated to just 2.1% (4.1% in August 2011). In terms of industries,
15 of the 22 industry groups (11 out of 22 in August 2011) in the manufacturing
sector registered positive growth during September 2011. Amongst industry
groups, ‘radio, TV and communication equipment and apparatus’ and ‘other
transport equipment’ continued their strong performance, growing by 25.0% and
19.0%, respectively. On the flip side, the industry groups ‘electrical machinery and
apparatus’ and ‘furniture manufacturing’ recorded negative growth of 27.7% and
8.2%, respectively.
Mining production (which accounts for 14.2% of industrial production) continued to
register a decline in production. The mining sector’s production fell by 5.6%
(growth of 4.3% in September 2010) compared to a 4.1% decline in August 2011.
Pace of the electricity sector’s industrial production remained healthy, registering
growth of 9.0% (aided by a low base) as compared to 9.5% in August 2011 and
1.8% in September 2010. Going forward, as the high base effect kicks in, the pace
of electricity production is also expected to moderate considerably.
As per use-based data, basic goods recorded growth of 4.5%, compared to
downward revised 5.2% growth in August 2011 and 3.5% in September 2010.
Growth in capital goods production fell into the negative territory (a decline of
6.8%) for the second time in three months. Pace of production of intermediate
goods remained muted at 1.5%. Consumer goods production grew at a faster
pace (3.5%) compared to August 2011 (2.3%), aided by pick-up in production of
consumer durables to 8.7% from 5.5% a month ago. Production of consumer nondurables
declined for the second straight month.
The below-expectation IIP numbers coupled with the recent set of moderating
economic data (such as weakening PMI and slowing exports growth) clearly
highlight the moderating economic growth trend witnessed over the past few
quarters. The RBI in its latest monetary policy review had also acknowledged the
fact of moderating economic growth and had hinted at a low probability of policy
rate action in its forthcoming review of the monetary policy. On the basis of our
expectation of moderation in inflation from December 2011 (on the basis of
weaker demand prospects due to slower global growth) and the considerably
slower economic growth trends, we do not expect further hike in policy rates in the
current interest rate cycle.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IIP growth slows to two-year low at 1.9% in September 2011
India’s industrial output grew at its slowest pace in two years in September 2011.
Industrial production grew by muted 1.9% yoy, well below Bloomberg’s survey
forecast of 3.5% and the downwardly revised 3.6% growth registered in August
2011. The 12-month rolling IIP growth has been on a declining trend since
November 2010, down from 9.9% in November 2010 to 6.7% as of August 2011.
Even YTD growth has moderated to just 5.0% from 8.2% in the corresponding
period last year.
Growth in manufacturing production, which accounts for ~75% of the industrial
production, moderated to just 2.1% (4.1% in August 2011). In terms of industries,
15 of the 22 industry groups (11 out of 22 in August 2011) in the manufacturing
sector registered positive growth during September 2011. Amongst industry
groups, ‘radio, TV and communication equipment and apparatus’ and ‘other
transport equipment’ continued their strong performance, growing by 25.0% and
19.0%, respectively. On the flip side, the industry groups ‘electrical machinery and
apparatus’ and ‘furniture manufacturing’ recorded negative growth of 27.7% and
8.2%, respectively.
Mining production (which accounts for 14.2% of industrial production) continued to
register a decline in production. The mining sector’s production fell by 5.6%
(growth of 4.3% in September 2010) compared to a 4.1% decline in August 2011.
Pace of the electricity sector’s industrial production remained healthy, registering
growth of 9.0% (aided by a low base) as compared to 9.5% in August 2011 and
1.8% in September 2010. Going forward, as the high base effect kicks in, the pace
of electricity production is also expected to moderate considerably.
As per use-based data, basic goods recorded growth of 4.5%, compared to
downward revised 5.2% growth in August 2011 and 3.5% in September 2010.
Growth in capital goods production fell into the negative territory (a decline of
6.8%) for the second time in three months. Pace of production of intermediate
goods remained muted at 1.5%. Consumer goods production grew at a faster
pace (3.5%) compared to August 2011 (2.3%), aided by pick-up in production of
consumer durables to 8.7% from 5.5% a month ago. Production of consumer nondurables
declined for the second straight month.
The below-expectation IIP numbers coupled with the recent set of moderating
economic data (such as weakening PMI and slowing exports growth) clearly
highlight the moderating economic growth trend witnessed over the past few
quarters. The RBI in its latest monetary policy review had also acknowledged the
fact of moderating economic growth and had hinted at a low probability of policy
rate action in its forthcoming review of the monetary policy. On the basis of our
expectation of moderation in inflation from December 2011 (on the basis of
weaker demand prospects due to slower global growth) and the considerably
slower economic growth trends, we do not expect further hike in policy rates in the
current interest rate cycle.
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