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NOVEMBER IIP
Industrial production jumped 5.9% in November from lows of -
4.7% (revised from -5.1%) in October
IIP growth in November came in sharply higher than estimates at 5.9%, after recording
2 year low reading in October at -4.7% (revised slightly upwards from -5.1%).
Cumulative growth during Apr-Nov FY12 has slowed to 3.8% vs 8.7% last year.
Despite strong 9.5% growth in Electricity (wt. 10.32%), slowdown in manufacturing
sector at 4.1% (wt. 75.53%) and contraction in mining sector at -2.5% (wt.
14.16%) brought down the industrial growth in Apr-Nov. 3MMA of IIP remained low
at 1.07% vs. 3.03% in September.
A sharp reversal in IIP from lows of October was not entirely unexpected, as indicated
by the robust performance of six core infrastructure sectors. The Eight Core
Industries Index had grown by 6.75%in November 2011, with an upside in five out
of eight industries. However, the m-o-m growth performance was positive only under
two out of eight industries.
Sector Trends:
(1) IIP in November reported increase of 550 bps m-o-m against -294 bps decrease
in October; under all three segments: the largest increase came in the Manufacturing
segment at 6.9% (m-o-m) and Mining segment grew by 4.2% (m-o-m).
Electricity recorded m-o-m contraction of -4.3%.
(2) Under use-based classification, Capital goods and Consumer goods noted strong
m-o-m growth rates at 14.2% and 15.3% respectively. Basic goods reported zero
m-o-m change and Intermediate goods recorded growth of 3.9% (m-o-m).
(3) Cumulatively growth during Apr-Nov was -2.5% in Mining; 4.1% in Manufacturing
and 9.5% in Electricity; IIP growth during the period was 3.8% as against
growth of 8.4% during Apr-Nov 2010.
Implication for interest rate
Headline inflation remained at elevated levels at 9.1% in November, while primary
articles decelerated sharply to 8.53%. Inflationary pressures are expected to moderate
going forward; so far WPI inflation has averaged at 9.56% during Apr-Nov as
against 9.59% observed during same period last year. Inflation for the month of
December (to be released on 16th January) is expected to be under 8%; last inflation
number before next policy on January 24th. There are expectations of a reduction
in CRR rates since borrowings under LAF has been over 1% of NDTL for past
few weeks (RBI's comfort zone is +/-1% of NDTL). Our view is that there is still
enough liquidity available to the banks as they have about 26% SLR holding against
mandated 24%. We believe regular usage of MSF facility would be the real indicator
of tight liquidity, which remains unused so far. We expect RBI to refrain from rate
cut as yet, while moderating its policy stance towards accommodative stance recognizing
slowdown in economic growth.
Use-based Trends:
(1) IIP growth was dominated by jump in consumer durables (11.2%) and consumer
non-durables (14.8%) moving the overall growth in Consumer goods being at
13.1%.
(2) Contraction in capital goods of -4.6%; followed by near zero intermediate group
(0.2%) and basic goods growth came at 6.3%.
Sectorally nearly 2/3rd industry groups in manufacturing sector posted positive
growth, primarily led by 'publishing, printing & recorded media' showing the highest
growth of 69.1%, followed by 41.8% in 'medical instruments', and watches and
29.3% in 'food products'. However, the industry group 'electrical machinery' has
shown a negative growth of -38.7% followed by -8.6% in 'furniture' and -6.4% in
'office machinery'.
The other items of consumer goods showing high positive growth include carpets
(110.6%), karnels (97.3%), newspapers (70.9%), tiles (65.3%), pipes & tubes
(49.9%), sugar (41.8%), rice (38.4%), scooter (37.6%), bags (34.7%) and leather
garments (33.5%).
However, some important items of the consumer goods are also showing negative
growth. These are: coirs & mattings -37.5%, antibiotics -19.7% and gems &
jewellery -17.0%. The other important items showing negative growth are: cement
machinery -72.1%, 'Cable, insulated rubber -65.5%, picture tubes -64.0%, converter
-61.4%, particle boards -30.3% and cotton yarn -18.7%.
The 3-month moving average in IIP growth rate (y-o-y) improved during November
2011 to 1.1% from 0.2% seen in October 2011. The current release on IIP contrasted
the dip shown by the PMI data for Manufacturing for the month of November.
However, PMI data has shown good pick in activity during the month of December
and even the IIP index is expected to show strength going forward.
In terms of contribution to IIP growth, manufacturing growth explains almost all of
the growth which contributed 5.23% to IIP growth of 5.93%; electricity contributed
1.21% in IIP while mining had a negative contribution of -0.53%. On use based
classification, basic goods contributed 2.49% and consumer goods contributed
4.05% in IIP growth. Capital goods had a negative contribution of -0.69% and intermediate
goods had near zero contribution to IIP growth.
A sharp reversal in IIP from lows of October was not entirely unexpected, as indicated
by the robust performance of six core infrastructure sectors. The Eight Core
Industries Index had grown by 6.75%in November 2011, with an upside in under
five out of eight industries. However, the m-o-m growth performance was positive
only under two out of eight industries
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
NOVEMBER IIP
Industrial production jumped 5.9% in November from lows of -
4.7% (revised from -5.1%) in October
IIP growth in November came in sharply higher than estimates at 5.9%, after recording
2 year low reading in October at -4.7% (revised slightly upwards from -5.1%).
Cumulative growth during Apr-Nov FY12 has slowed to 3.8% vs 8.7% last year.
Despite strong 9.5% growth in Electricity (wt. 10.32%), slowdown in manufacturing
sector at 4.1% (wt. 75.53%) and contraction in mining sector at -2.5% (wt.
14.16%) brought down the industrial growth in Apr-Nov. 3MMA of IIP remained low
at 1.07% vs. 3.03% in September.
A sharp reversal in IIP from lows of October was not entirely unexpected, as indicated
by the robust performance of six core infrastructure sectors. The Eight Core
Industries Index had grown by 6.75%in November 2011, with an upside in five out
of eight industries. However, the m-o-m growth performance was positive only under
two out of eight industries.
Sector Trends:
(1) IIP in November reported increase of 550 bps m-o-m against -294 bps decrease
in October; under all three segments: the largest increase came in the Manufacturing
segment at 6.9% (m-o-m) and Mining segment grew by 4.2% (m-o-m).
Electricity recorded m-o-m contraction of -4.3%.
(2) Under use-based classification, Capital goods and Consumer goods noted strong
m-o-m growth rates at 14.2% and 15.3% respectively. Basic goods reported zero
m-o-m change and Intermediate goods recorded growth of 3.9% (m-o-m).
(3) Cumulatively growth during Apr-Nov was -2.5% in Mining; 4.1% in Manufacturing
and 9.5% in Electricity; IIP growth during the period was 3.8% as against
growth of 8.4% during Apr-Nov 2010.
Implication for interest rate
Headline inflation remained at elevated levels at 9.1% in November, while primary
articles decelerated sharply to 8.53%. Inflationary pressures are expected to moderate
going forward; so far WPI inflation has averaged at 9.56% during Apr-Nov as
against 9.59% observed during same period last year. Inflation for the month of
December (to be released on 16th January) is expected to be under 8%; last inflation
number before next policy on January 24th. There are expectations of a reduction
in CRR rates since borrowings under LAF has been over 1% of NDTL for past
few weeks (RBI's comfort zone is +/-1% of NDTL). Our view is that there is still
enough liquidity available to the banks as they have about 26% SLR holding against
mandated 24%. We believe regular usage of MSF facility would be the real indicator
of tight liquidity, which remains unused so far. We expect RBI to refrain from rate
cut as yet, while moderating its policy stance towards accommodative stance recognizing
slowdown in economic growth.
Use-based Trends:
(1) IIP growth was dominated by jump in consumer durables (11.2%) and consumer
non-durables (14.8%) moving the overall growth in Consumer goods being at
13.1%.
(2) Contraction in capital goods of -4.6%; followed by near zero intermediate group
(0.2%) and basic goods growth came at 6.3%.
Sectorally nearly 2/3rd industry groups in manufacturing sector posted positive
growth, primarily led by 'publishing, printing & recorded media' showing the highest
growth of 69.1%, followed by 41.8% in 'medical instruments', and watches and
29.3% in 'food products'. However, the industry group 'electrical machinery' has
shown a negative growth of -38.7% followed by -8.6% in 'furniture' and -6.4% in
'office machinery'.
The other items of consumer goods showing high positive growth include carpets
(110.6%), karnels (97.3%), newspapers (70.9%), tiles (65.3%), pipes & tubes
(49.9%), sugar (41.8%), rice (38.4%), scooter (37.6%), bags (34.7%) and leather
garments (33.5%).
However, some important items of the consumer goods are also showing negative
growth. These are: coirs & mattings -37.5%, antibiotics -19.7% and gems &
jewellery -17.0%. The other important items showing negative growth are: cement
machinery -72.1%, 'Cable, insulated rubber -65.5%, picture tubes -64.0%, converter
-61.4%, particle boards -30.3% and cotton yarn -18.7%.
The 3-month moving average in IIP growth rate (y-o-y) improved during November
2011 to 1.1% from 0.2% seen in October 2011. The current release on IIP contrasted
the dip shown by the PMI data for Manufacturing for the month of November.
However, PMI data has shown good pick in activity during the month of December
and even the IIP index is expected to show strength going forward.
In terms of contribution to IIP growth, manufacturing growth explains almost all of
the growth which contributed 5.23% to IIP growth of 5.93%; electricity contributed
1.21% in IIP while mining had a negative contribution of -0.53%. On use based
classification, basic goods contributed 2.49% and consumer goods contributed
4.05% in IIP growth. Capital goods had a negative contribution of -0.69% and intermediate
goods had near zero contribution to IIP growth.
A sharp reversal in IIP from lows of October was not entirely unexpected, as indicated
by the robust performance of six core infrastructure sectors. The Eight Core
Industries Index had grown by 6.75%in November 2011, with an upside in under
five out of eight industries. However, the m-o-m growth performance was positive
only under two out of eight industries
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