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IIP grew by a paltry 1.9% YoY in September, the lowest in two years and
well below our expectation of ~3.0%. In fact, on a sequential basis (MoM%,
sa, 3MMA), contraction in industrial output was close to the levels seen
during the crisis of 2008‐09. Evidently, the economic slowdown is
intensifying and becoming far more broad‐based. Sectoral data suggests
that mining and manufacturing weakness has deepened although electricity
has held steady. Weakness in capital goods output (reflecting investment
demand) is leading the slowdown in manufacturing while consumer goods
production is also turning soft. Going ahead, weak intermediate goods,
unrelenting policy hurdles and an expected slowdown in exports do not
augur well for industrial production. Accordingly, downside risks to our GDP
growth projection of 7.6% have increased significantly. In sum, the data
reinforces our belief that RBI would halt in its rate tightening cycle in the
upcoming monetary policy.
IIP slowdown deepens
IIP for September came in at ~1.9% YoY, below consensus estimate of ~3.5% and our
expectation of 3%. Clearly, the economic slowdown is intensifying and becoming broadbased
with both consumption and investment goods production slowing considerably.
Importantly, on a seasonally adjusted (SA) sequential 3MMA basis, IIP contracted by
~1.6%, a level last seen in Jan 09, reflecting the pronounced nature of weakness.
Trend in sector-wise data suggests that the weakness in mining and manufacturing has
stepped up although electricity production continued to be strong. Use-based
classification reflected that production of consumer goods, forward-looking intermediate
goods and capital goods remained soft. Meanwhile, aided by a strong electricity
production, basic goods continued to grow at a healthy clip.
Manufacturing sees a sharp sequential contraction…
Manufacturing sector continues to be on a downtrend, growing at a feeble~ 2.1% (YoY) in
September compared to a trend growth of ~9%-10%. What is noteworthy is that on a
sequential basis (SA M-o-M%, 3MMA), manufacturing activity contracted 1.9%, a level
last witnessed during the crisis of 2008-09. Such a severe contraction is largely led by the
ongoing weakness in investment activity (as seen in capital goods production) which in
turn has been the result of multiple factors such as policy inaction by the government,
aggressive RBI tightening and highly uncertain external environment.
Meanwhile, mining activity contracted yet again by ~5.6% in September (vs -4.1% in Aug),
largely reflecting a sharp contraction in coal mining activity (~18% and ~15% in Sept and
Aug respectively). Heavy rains disrupted the mining activity during the month.
Nevertheless, the policy inaction (especially environmental) remains a big overhang on
the sector as reflected by a 1.0% contraction in the sector on YTD basis compared to a
growth of 7.2% during the same period last year
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IIP grew by a paltry 1.9% YoY in September, the lowest in two years and
well below our expectation of ~3.0%. In fact, on a sequential basis (MoM%,
sa, 3MMA), contraction in industrial output was close to the levels seen
during the crisis of 2008‐09. Evidently, the economic slowdown is
intensifying and becoming far more broad‐based. Sectoral data suggests
that mining and manufacturing weakness has deepened although electricity
has held steady. Weakness in capital goods output (reflecting investment
demand) is leading the slowdown in manufacturing while consumer goods
production is also turning soft. Going ahead, weak intermediate goods,
unrelenting policy hurdles and an expected slowdown in exports do not
augur well for industrial production. Accordingly, downside risks to our GDP
growth projection of 7.6% have increased significantly. In sum, the data
reinforces our belief that RBI would halt in its rate tightening cycle in the
upcoming monetary policy.
IIP slowdown deepens
IIP for September came in at ~1.9% YoY, below consensus estimate of ~3.5% and our
expectation of 3%. Clearly, the economic slowdown is intensifying and becoming broadbased
with both consumption and investment goods production slowing considerably.
Importantly, on a seasonally adjusted (SA) sequential 3MMA basis, IIP contracted by
~1.6%, a level last seen in Jan 09, reflecting the pronounced nature of weakness.
Trend in sector-wise data suggests that the weakness in mining and manufacturing has
stepped up although electricity production continued to be strong. Use-based
classification reflected that production of consumer goods, forward-looking intermediate
goods and capital goods remained soft. Meanwhile, aided by a strong electricity
production, basic goods continued to grow at a healthy clip.
Manufacturing sees a sharp sequential contraction…
Manufacturing sector continues to be on a downtrend, growing at a feeble~ 2.1% (YoY) in
September compared to a trend growth of ~9%-10%. What is noteworthy is that on a
sequential basis (SA M-o-M%, 3MMA), manufacturing activity contracted 1.9%, a level
last witnessed during the crisis of 2008-09. Such a severe contraction is largely led by the
ongoing weakness in investment activity (as seen in capital goods production) which in
turn has been the result of multiple factors such as policy inaction by the government,
aggressive RBI tightening and highly uncertain external environment.
Meanwhile, mining activity contracted yet again by ~5.6% in September (vs -4.1% in Aug),
largely reflecting a sharp contraction in coal mining activity (~18% and ~15% in Sept and
Aug respectively). Heavy rains disrupted the mining activity during the month.
Nevertheless, the policy inaction (especially environmental) remains a big overhang on
the sector as reflected by a 1.0% contraction in the sector on YTD basis compared to a
growth of 7.2% during the same period last year
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