By Ruma Dubey

After the depressing markets and the even more disturbing happenings in the Parliament, the CPI and IIP data which came in later in the evening were worth cheering. At last some good news!

First July CPI. Food inflation came in at 2.15% v/s 5.48% (MoM) and that alone helped the overall CPI come at down at 3.78% v/s 5.4% (MoM). This was a huge surprise, with CPI coming down almost 1% lower than what was widely expected. Vegetable prices contracted 7.93% v/s 5.37% (MoM). This was truly mind boggling. A recent visit to the market to buy veggies surely did not indicate that! Maybe it is the weightage of some vegetables like potato and onions whose prices are down which in turn has marked down the overall basket. Almost all across the board prices have come down - Clothing, Footwear inflation down at 5.88% Vs 6.34%, Fuel & Light down at 5.36% Vs 5.92% (MoM) and Cereals & Product prices down at 1.06% Vs 1.98% (MoM).

June IIP was another pleasant surprise at 3.8%, which is a four-month high. Consumer durable was the big elephant in the room – it came in at an unbelievable 16% growth v/s contraction of 3.9% in May. This was probably some pent up demand showing up in urban areas and also the lower base effect. But capital goods number shows that these numbers could be a blip – it came in at -3.6% v/s 1.8%. This means that things on the ground remain worrisome.

Other internals of the IIP – Consumer goods output was at 6.6% v/s -1.6% (Mom), Consumer Non-durables was at 1.3% v/s -0.1%, Consumer durables was at 16% v/s -3.9%, Intermediate goods was at 0.8% v/s 1.2%, mining was at -0.3% v/s 2.8%, Manufacturing was at 4.6% v/s 2.2% and electricity was at 1.3% v/s 6%.

In terms of industries, 16 out of the 22 industry groups in the manufacturing sector showed positive growth during June (YoY) – Furniture has shown the highest positive growth of  83.7%, followed by 27.6% in Wearing apparel; dressing and dyeing of fur and 21% in wood and products of wood & cork except furniture; articles of straw & plating material.

On the other hand, the industry group ‘Publishing, printing &reproduction of recorded media’ has shown the highest negative growth of -11.4% followed by -10% in Electrical machinery & apparatus and -8.7% in Radio, TV and communication equipment & apparatus.

Some of the important items showing high positive growth during the current month over the same month in previous year include H R Sheets, Gems and Jewellery, Conductor, Aluminium, Woollen Carpets, Wood furniture, Transformers (small), Plastic machinery including moulding machinery, Stainless/ alloy steel, Pens of all kind, Apparels, Block Board, Carbon Steel and ‘Leather Garments.

Some of the other important items showing high negative growth are: Air & Gas Compressors, Instant Food Mixes (Ready to eat), Grinding Wheels, Linear Alkyl Benzene, Cable, Rubber Insulated, Aerated Waters and Soft Drinks, Tractors (complete) and Furnace Oil.

This is good news for the market which is currently trapped in the Parliament logjam but the upward momentum will not be sustained if the Monsoon session ends without passing the GST Bill. Thus for now, all eyes will be on the Parliament with hopes that Modi intervenes, uses diplomacy and brings this logjam to an end.

Interest rate cuts by RBI? This at current juncture seems unlikely as the Governor would surely like to wait for a month or two before he is convinced that prices are indeed headed down. The next RBI meet is on 29th Sept but before that we have July IIP and August CPI data scheduled for 11th Sept, the US Fed meet on 17th Sept.