NOV IIP - THANK GOD IT CAME FRIDAY EVENING!
By Ruma Dubey
| PARTICULARS |
|
| Nov’13 | Oct’13 | Sep’13 | Aug’13 | July’13 | June’13 | May’13 | April’13 | YoY | |||||||
| IIP |
|
| -2.1% | -1.8% | 2.0% | 0.6% | 2.6% | -2.2% | -1.6% | 2% | -1% | |||||||
| Cons Durable |
|
| -21% | -12% | 10.8% | -7.6% | -9.3% | -10.5% | -10.4% | -8.3% | 1.1% | |||||||
| Manufacturing |
|
| -3.5% | -2% | 0.6% | -0.1% | 3% | -3.2% | -2% | 2.8% | -0.8% | |||||||
| Capital Goods |
|
| 0.3% | 2.3% | -6.8% | -2.0% | 15.6% | -6.6% | -2.7% | 1% | -8.5% | |||||||
| Basic Goods |
|
| 0.7% | -1.6% | 5.4% | 1.5% | 1.7% | -1.9% | -0.4% | 1.3% | 1.1% | |||||||
| Mining |
|
| 1% | -3.5% | 3.3% | -0.2% | -2.3% | -4.1% | -5.7% | -3% | -5.5% | |||||||
| Electricity |
|
| 6.3% | 1.3% | 12.9% | 7.2% | 5.2% | 0 | 6.2% | 0.7% | 2.4% | |||||||
| Cons Non Durbl |
|
| 2.5% | 1.8% | 11.3% | 5.0% | 6.8% | 5% | 1.7% | 12.3% | -1.5% | |||||||
| Interm Goods |
|
| 3.3% | 1.8% | 4.1% | 3.6% | 2.4% | 1.1 | 1.5% | 2.4% | -1.4% |
It is numbers like these which make you feel that thankfull the IIP timing has been shifted to the evening or else, today the markets would have crashed, negating all the good which Infosys numbers brought in.
There seems to be no respite from the slowdown and manufacturing sector slowdown has been the main culprit this time. It contributes almost 80% to the IIP basket, so naturally when this is down, the entire growth rate has to get rattled.
The saviour to an extent has been electricity, which showed a growth of 6.3% and mining too showed a growth of 1%, better than the degrowth of 3.5% last month. Another shocker was consumer durables growth rate falling by a whopping 21%. It had already shown signs of stress in Oct and it only got worse in Nov. The crisis in the sugar sector could have added to this degrowth in consumer durables, which comes under the basket of Food Products.
This somehow seems to push away any hopes of recovery in the second half any time soon. At the same time, it makes one wonder whether the RBI Governor will take a respite on rate hikes once again on 28th Jan, given this shrinkage of growth. The IIP data indicates that there has been tremendous demand destruction and that means, inflation going ahead is sure to ease, coupled with the good monsoon and harvest. Oct and Nov are two of the best months given the festive season demand; so when this is down, it is a cause for worry. And another rate hike at this juncture could prove to be detrimental for the growth rate again.
In the manufacturing sector, 10 out of 22 industry groups covered under this showed a negative growth where ‘Radio, TV and communication equipment & apparatus’ showed the maximum fall, followed by Office, accounting & computing machinery’ and ‘Furniture. Now this makes one wonder whether these goods have any major relevance in the overall manufacturing sector to bring down the entire IIP?
There is enough evidence to prove that sugar was a major culprit. Sugar showed a contraction of 56%, molasses of 61% and sugar machinery of 32%.
The sectors which showed positive growth were – Ship building & repairs, Wood Furniture, cable, rubber insulated, Antibiotics & its preparations, Ayurvedic Medicaments, Room Air Conditioners, Plastic Machinery and Tractors.
But immediately in the short run, things do not look good with lower IIP. The markets will now wait and watch the December CPI rates. RBI stated that it expects retail inflation is likely to remain around or even above 9% in the months ahead, absent policy action. The key question now is – will RBI be concerned about falling growth or stay focused on inflation? Falling consumer durables could be attributed to sugar but contraction in manufacturing is indeed worrying.
The rosy haze left by Infosys since the morning is now washed off completely. The market could be waking up to a reality where, at the moment, things look bleak. We clearly do not have a rate cut to look forward, any time soon and probably need to once again concentrate on earnings, which hopefully will lift the sentiments.
For now, enjoy the weekend, maybe catch up with a good movie; after all Monday is another day and us worrying will not magically wash away all these uncomfortable economic truths.