IIP Update July 2012 | Economy

September 12, 2012

IIP Update July 2012

Growth in July IIP flat at 0.1%
Key highlights
As per the Quick Estimates on the Index of Industrial Production (IIP), industrial production reported a flat growth of 0.1% In July 2012 as compared to 3.7% in the corresponding period of the previous year. Growth in IIP recovered modestly after witnessing a contraction of 1.8% in June 2012. Cumulative growth in the April-July 2012-13 period declined by 0.1% as compared to 6.1% in the corresponding period in 2011-12.

Bhupali Gursale
022-3935 7800 Ext: 6820 bhupali.gursale@angelbroking.com

Performance on Sectoral basis:

On a y-o-y basis, Mining reported a de-growth of 0.7%, continuing the weak trend witnessed in the preceding months on account of regulatory hurdles in the sector. The Manufacturing sector, with the highest weightage of 75.5%, recovered with a marginal contraction of 0.2% as compared to a de-growth of 3.1% in June 2012. Recovery in the manufacturing sector has supported overall growth in industrial production for July 2012. Electricity growth slipped to 2.8% after witnessing robust growth of 8.8% for the month of June 2012. In the April-July 2012-13 period, Mining and Manufacturing sectors recorded a de-growth of 1% and 0.5% respectively. The Electricity sector reported a modest growth of 5.5%. In the Manufacturing sector, as per the 2-digit level classification in terms of industries, merely 8 out of the 22 industry groups have shown positive growth during the month of July 2012. Publishing, printing & reproduction of recorded media reported the highest growth of 17% while Electric Machinery and apparatus has shown the largest negative growth of 12.8%.

Performance in the Use-based category:

Under the Use-based classification, on a y-o-y basis, Basic goods and Intermediate goods reported tepid growth of 1.5% and 1.1% respectively for July 2012. Growth in Capital goods decelerated by 5% as compared to a staggering de-growth of 27.9% in the previous month, mainly due to a low base effect. The Consumer goods sector reported an overall growth of 0.7% as compared to 4.1% growth in June 2012. Growth in consumer durables declined to 1.4% as compared to a growth of 9.2% in the previous month and 9% growth in July 2011. Consumer non-durables reported a growth of 0.1% as compared to a contraction in growth of 0.1% in June 2012.

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IIP Update July 2012

Exhibit 1: Growth in IIP

Weights General Index Sectoral Classification Mining Manufacturing Electricity Use-based Classification Basic goods Capital goods Intermediate goods Consumer goods - Consumer durables - Consumer non-durables
Source: MOSPI, Angel Research

Jul-12 0.1 (0.7) (0.2) 2.8 1.5 (5.0) (1.1) 0.7 1.4 0.1

Jun-12 (1.8) 0.2 (3.1) 8.8 4.2 (28.1) 0.6 4.1 9.2 (0.1)

May-12 2.5 (0.6) 2.6 5.9 4.2 (8.8) 3.7 4.5 9.8 0.3

Jul-11 3.7 0.6 3.1 13.1 10.0 (13.7) (0.1) 6.4 9.0 4.1

1000 141.57 755.27 103.16 355.65 92.57 265.14 286.64 53.65 232.99

Exhibit 2: IIP Growth (%, yoy)

(%) 10 8 6 4 2 (2) (4) (6) Apr May (1.3) Jun (1.8) (5.0) Jul Aug Sep Oct Nov Dec Jan Feb Mar 5.3 6.2 3.7 2.5 0.1 3.4 9.5 FY2011-12 FY2012-13

Exhibit 3: Trends in Manufacturing & Services PMI

60 58 6.0 4.1 56 54 52 50 Apr-11 Sep-11 Oct-11 Nov-11 Dec-11 Feb-12 Apr-12 Jan-12 Jul-11 May-11 Jun-11 May-12 Aug-11 Mar-12 Jun-12 Jul-12 (2.8) 48 Aug-12 Manufacturing PMI Services PMI

2.5

2.7 1.1

Source: MOSPI, Angel Research

Source: Markit, HSBC, Angel Research

Eight Core Industries: The Index for Eight Core Industries, having a combined weight of 37.9% in the IIP, reported a muted growth of 1.8% in July 2012 as compared to 3.9% in the previous month and 8.2% in July 2011. Steel, Cement, Petroleum Refinery Products, Electricity and Coal recorded positive growth rates while Natural Gas, Fertilizers and Crude oil witnessed a deceleration in growth. Manufacturing Purchasing Managers Index (PMI): Indias HSBC Manufacturing PMI declined to a nine-month low in August 2012 to 52.8 as compared to 52.9 in July 2012. Policy implication: Going ahead, the growth outlook for industrial production is likely to remain weak on account of the high interest rate environment and deterioration in capex activity. In spite of sluggish industrial growth, we believe that the Reserve Bank of India is unlikely to ease monetary policy on September 17, 2012 since inflation continues to remain at elevated levels with persistent upside risks. Factors such as high food inflation, increase in minimum support prices (MSP), supply-side bottlenecks in agriculture, increase in crude and retail petrol prices, revision of electricity tariff and the impending hike in diesel prices are likely to aggravate inflationary pressures in the economy.

September 12, 2012

IIP Update July 2012

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September 12, 2012

IIP Update July 2012

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September 12, 2012