Industrial growth slows in November 2018 but pockets of promising demand exist

Date: 11.1.2019

Impact: Negative (Manufacturing, Overall Economy)

Brief: As per IIP data, industrial production has expanded by 0.5% in November, 2018 as against 8.5% a year earlier. The November print is lowest over the last one and half years. On the sectoral front, consumer durables (8.2%), non-durables (3.9%), infrastructure (5%), intermediate goods (4.5%) have registered healthy growth during the reference period. However, performance of these sector has been neutralized by de-growth in the capital goods segment (-) 3.4%. Performance of overall manufacturing sector on the other hand contracted by (-) 0.4% during the said period. It is not clear whether inventory build-up or lower than expected demand is effecting manufacturing.

As per IIP data, industrial production has expanded by 0.5% in November, 2018 as against 8.5% a year earlier. The November print is lowest over the last one and half years. On the sectoral front, consumer durables (8.2%), non-durables (3.9%), infrastructure (5%), intermediate goods (4.5%) have registered healthy growth during the reference period. However, performance of these sector has been neutralized by de-growth in the capital goods segment (-) 3.4%.

The mild performance in industrial production is a result of a fall in consumption in the global as well as domestic markets. A slower pace in global export and oil consumption augur contraction in global consumption. On the domestic front however, growth in private consumption has remained upbeat at 7.1% in Q3, FY19 (CSO estimates), albeit lower than anticipated. While, it is already known that the rural market has been facing slower growth in wage rate, which expanded by just 1.2% in November, 2018 as against 3.1% a year earlier – demand remains robust. This is because consumer non-durables category is recording a very strong growth despite a significant base effect (+22%). Similarly, higher fuel price has had very little effect on the disposable income of consumers.

Performance of overall manufacturing sector on the other hand contracted by (-) 0.4% during the said period. It is not clear whether inventory build-up or lower than expected demand is effecting manufacturing. The recent liquidity deficit may have also adversely impacted businesses of manufacturing entities but no clear correlations can be made as of now.

Industrial Performance (Economic base)

 

IIP

Mining

Manu

Core

FY15

4.02

-1.34

3.75

4.94

FY16

3.33

4.34

2.9

2.98

FY17

4.58

5.33

4.32

4.76

FY18

4.38

2.31

4.6

4.28

Nov-17

8.54

1.41

10.37

5.02

Apr-18

4.86

5.06

5.2

4.44

May-18

3.21

5.7

2.79

4.65

Jun-18

7.04

6.6

6.9

6.67

Jul-18

6.61

3.35

6.96

6.63

Aug-18

4.3

-0.43

4.59

4.16

Sep-18

4.47

0.21

4.62

4.28

Oct-18

8.08

7.04

7.92

4.80

Nov-18

0.5

2.7

-0.4

3.55

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