Economy Poor mfg output pulls IIP into negative territory n Emkay

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Economy

Poor mfg output pulls IIP into negative territory

n     IIP growth for Oct 2011 at -5.1% came significantly lower than our expectation of -1.5% and consensus -0.5%. With this the IIP growth has fallen close to the Jan 2009 low of -5.3%

n     Surprise came from -6%yoy for mfg sector vs our expectation of -1.6%. Max contraction in cap goods sector at -25.5% followed by intermediate goods sector at -4.7%

n     Consumption sector also slowing along with investments. Notably while durables grew 0.3% (despite festival season), non-dur prod has been contracting over Sep and Oct 2011

n     Today’s IIP data has strengthened our take on possible accommodative monetary policy actions on Dec 16 and the coming months