GDP - Bottoming-out ::Edelweiss pdf link

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Real GDP grew 6.1% YoY in Q3FY12 (expected 6.3%), sharply down from 6.9% recorded last quarter. Indeed economic momentum (QoQ , SA) has been slowing for some time now. Notably, the slowdown is largely industry-led (manufacturing growth bare and mining contracted), with services and agriculture expanding at a healthy clip. On the expenditure side, investment remains very sluggish, largely reflecting weakness in capex activity. Pick-up in construction growth, however, points to improving infra spending.

Going into Q4FY12, industrial growth should improve, as suggested by pick up in manufacturing momentum in Nov-Dec period (on MoM SA, 3MMA basis), improvement in mining activity and jump in forward looking PMI data. Besides, base effect will be supportive in Q4 against Q3. Overall, we believe Q3 marks the bottom of the ongoing economic downturn, although pick up is likely to be very gradual.  We retain our GDP growth forecast at ~6.9-7.0% for FY12.

GDP - Bottoming-out