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IIP grew sharply by 6.8% YoY in January against a weak, but upwardly
revised 2.5% in December thanks to an unusual spurt in consumer nondurables
(up ~42% YoY). Ex‐non‐durables, IIP contracted 0.8%. Such spikes
in IIP (and its components) make it totally difficult to capture the underlying
trend in the industrial activity. We feel that MoM 3MMA seasonally
adjusted data does a better job in capturing the trend. On this basis, it
seems that the industrial activity has improved in Nov‐Jan period compared
to the extremely weak phase of Jun‐Oct 2011. This is consistent with the
improvement in PMI data. Nonetheless, it is too early to comment on the
nature of the surge as much will depend on the policy action by the
government in the forthcoming budget (and otherwise) and also the pace of
monetary easing throughout the coming year.
IIP growth at ~6.8%, surprises on the upside
IIP growth for Jan 2012 at ~6.8% YoY came in at higher than ours (~2.5%) and market
expectations (~2.1%). This was entirely due to the inexplicable, but stupendous growth in
consumer non‐durables (~42% YoY). Ex–consumer non‐durables, IIP actually recorded a
contraction of ~0.8% YoY on top of the 0.5% decline seen in Dec 11. Clearly, the industrial
activity remains very weak.
However, it must be noted that the monthly (YoY) data is volatile as its gets influenced by
the base effect and therefore, occasionally masks underlying trends. In this regard, we
believe that MoM 3MMA seasonally adjusted data is better suited to capture the
underlying trend. On this basis, IIP data shows a decent expansion in January over and
above a healthy pick up in previous months. Indeed, one can deduce that the industrial
activity is recovering from its extremely weak phase of June‐Oct. This is quite consistent
with the improvement observed in PMI data since late last year and the sequential
improvement in exports.
Mining, electricity show decent sequential growth
Mining activity contracted 2.7% YoY though at a slower pace compared to previous
months. Electricity growth also slowed sharply to 3.2% YoY but it was largely due to a high
base effect. On more stable MoM 3MMA seasonality adjusted (SA) basis, mining and
electricity continued to show positive growth albeit at a slower pace. Manufacturing
showed a strong growth, but the data is clouded by an unusual jump in consumer nondurables
goods production, rather inexplicably.
Among eight core industries, crude oil, natural gas, refinery products and steel were in
contraction zone while cement and coal production registered a healthy growth. Overall,
core sector growth came in at ~0.5% (YoY) for Jan 12 against ~3.1% in Dec 2011.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IIP grew sharply by 6.8% YoY in January against a weak, but upwardly
revised 2.5% in December thanks to an unusual spurt in consumer nondurables
(up ~42% YoY). Ex‐non‐durables, IIP contracted 0.8%. Such spikes
in IIP (and its components) make it totally difficult to capture the underlying
trend in the industrial activity. We feel that MoM 3MMA seasonally
adjusted data does a better job in capturing the trend. On this basis, it
seems that the industrial activity has improved in Nov‐Jan period compared
to the extremely weak phase of Jun‐Oct 2011. This is consistent with the
improvement in PMI data. Nonetheless, it is too early to comment on the
nature of the surge as much will depend on the policy action by the
government in the forthcoming budget (and otherwise) and also the pace of
monetary easing throughout the coming year.
IIP growth at ~6.8%, surprises on the upside
IIP growth for Jan 2012 at ~6.8% YoY came in at higher than ours (~2.5%) and market
expectations (~2.1%). This was entirely due to the inexplicable, but stupendous growth in
consumer non‐durables (~42% YoY). Ex–consumer non‐durables, IIP actually recorded a
contraction of ~0.8% YoY on top of the 0.5% decline seen in Dec 11. Clearly, the industrial
activity remains very weak.
However, it must be noted that the monthly (YoY) data is volatile as its gets influenced by
the base effect and therefore, occasionally masks underlying trends. In this regard, we
believe that MoM 3MMA seasonally adjusted data is better suited to capture the
underlying trend. On this basis, IIP data shows a decent expansion in January over and
above a healthy pick up in previous months. Indeed, one can deduce that the industrial
activity is recovering from its extremely weak phase of June‐Oct. This is quite consistent
with the improvement observed in PMI data since late last year and the sequential
improvement in exports.
Mining, electricity show decent sequential growth
Mining activity contracted 2.7% YoY though at a slower pace compared to previous
months. Electricity growth also slowed sharply to 3.2% YoY but it was largely due to a high
base effect. On more stable MoM 3MMA seasonality adjusted (SA) basis, mining and
electricity continued to show positive growth albeit at a slower pace. Manufacturing
showed a strong growth, but the data is clouded by an unusual jump in consumer nondurables
goods production, rather inexplicably.
Among eight core industries, crude oil, natural gas, refinery products and steel were in
contraction zone while cement and coal production registered a healthy growth. Overall,
core sector growth came in at ~0.5% (YoY) for Jan 12 against ~3.1% in Dec 2011.
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