By Ruma Dubey

It was a BIG surprise and the upward rally that we saw today could get some momentum with this macro data.

IIP for January rose while CPI for February fell – this is like the best case scenario.

Thanks to overall softening of prices, led by prices of vegetables and food, CPI came in at 4.4% v/s 5.07% (MoM) – a three month low. Most economists say that March CPI too will come around 4.5 to 4.6% and this means, it will undershoot RBI’s target by almost 0.5%. RBI estimated the retail inflation for 2018-19 in the range of 5.1-5.6% during April-September and 4.5-4.6% in second half of the year.

Internals of CPI (MoM):

• Food inflation 3.26% v/s 4.58%
• Fuel inflation 6.80% v/s 7.73%
• Vegetable inflation 17.57% v/s 26.97%
• Clothing and footwear 5.12% v/s 5.05%
• Cereals % 2.10% v/s 2.33%
• Milk and milk products 3.83% v/s 4.21%
• Pulses -17.35% v/s -20.19%
• Housing 8.28% v/s 8.33%

On the other hand, IIP for Jan was at 7.5% v/s 7.1% (MoM). This was led by better growth in manufacturing, electricity, capital goods. Electricity, sugar and two wheelers were some of the largest contributors to the IIP growth while some products like tobacco products, gold jewellery, readymade garments, knitted , plastic bags were the laggards. Consumer durables and non-durables too did pretty well. Mining was the loose coin in an otherwise good month of growth.

In terms of industries, sixteen out of the twenty three industry groups in the manufacturing sector have shown positive growth during the month of January 2018 as compared to the corresponding month of the previous year. The industry group ‘Manufacture of other transport equipment’ has shown the highest positive growth of 33.1 percent followed by 27.8 percent in ‘Manufacture of furniture’ and 26.6 percent in ‘Manufacture of motor vehicles, trailers and semi-trailers’. On the other hand, the industry group ‘Manufacture of tobacco products’ has shown the highest negative growth of (-) 46.5 percent followed by (-) 32.4 percent in ‘Other manufacturing’ and (-) 13.2 percent in ‘Printing and reproduction of recorded media’.

Some important item groups showing high positive growth during the current month over the same month in previous year include ‘Bodies of trucks, lorries and trailers’ (267.5%), ‘Steroids and hormonal preparations (including anti-fungal preparations)’ (102.9%), ‘Stainless steel utensils’ (89.2%), ‘Axle’ (58.8%), ‘Separators including decanter centrifuge’ (49.7%), ‘Sugar’ (40.9%), ‘Two-wheelers (motorcycles/ scooters)’ (37.7%), ‘Digestive enzymes and antacids (incl. PPI drugs)’ (31.7%), ‘Commercial Vehicles’ (29.8%), ‘Films of polythene, polyester, PVC & other forms of plastic’ (22.0%) and ‘Cement- all types’ (21.5%).

Some important item groups that have registered high negative growth include ‘Jewellery of gold (studded with stones or not)’ [(-) 73.8%], ‘Other tobacco products’ [(-) 73.4%], ‘Hand Tools incl. interchangeable tools, not mechanised’ [(-) 64.7%], ‘Bags/ pouches of HDPE/ LDPE (plastic)’ [(-) 40.7%], ‘Kerosene’ [(-) 37.3%], ‘Material handling, lifting and hoisting equipment’ [(-) 34.3%], ‘Plastic components of packing/ closing/ bottling articles & of electrical fittings’ [(-) 29.1%], ‘Paper of all kinds excluding newsprint’ [(-) 28.8%], ‘Medical/ surgical accessories’ [(-) 27.1%] and ‘Printed Books (incl. Manuals, reports, brochures, catalogs, etc.)’ [(-) 21.1%].

So the big question once again – what will RBI do? Most likely, it will continue to maintain a status quo and we could see a 25 bps rate hike in the second half of the fiscal.

For now, these macro numbers are good and the numbers next month too will spread cheer.