Industrial Production - July 2012 - Eastern Financiers Ltd.

IIP growth persisted to be murky for yet another month parking at meager 0.1% during July 2012 against anticipation of about 0.3-0.5% and prior month's negative growth of (1.8)% which may primarily be attributed to the slowdown in Manufacturing and Capital Goods sector that endured to be bleak. Growth in July 2011 stood at 3.7%. Moreover, the country's eight key infrastructure sector growth that has 37.9% weightage in the IIP index parked at truncated growth of 1.8% for the month of July against 3.6% in the preceding month of June-the slowest pace since January this year which indicated a shoddy IIP numeral for the month. Even Exports tanked almost 15% in July, slipping four times in the last five months which may be attributed to the dented demand from global economies along with the European tumult. Cumulative growth over the April-July period of FY13 landed at negative (0.1)% against beefy 6.1% growth clocked during the same period last fiscal.

The anemic pace of expansion in Industrial Growth suggests that the broader economic activity continues to be weak. Industrial output accounts for a little over 15% of India's Gross Domestic Product and the consensus points to continuing weakness for the economy which languished near a three-year low of 5.5% for the first quarter of FY13.

Capital Goods once again has been the biggest drag on the IIP Index that has climbed only once since the last nine months, during February that was a blip. The segment which is a key investment indicator once again witnessed degrowth of 5% after slithering massively 27.% in the preceding month. The number has been extremely volatile in the preceding months that kept the overall index serrated. Manufacturing sector that constitutes over 75% of the IIP index edged lower by 0.2% during July 2012 against growth of 3.1% during like month last fiscal. Mining that has around 14% weightage in the IIP index reverted back to clock negative growth of (0.7)% after preceding month's flattish growth of 0.6% that was followed by consecutive months of negative growth in the midst of series of bans that hit the sector. Mining recorded negative growth of 0.7% in July last year.

However, Consumer Durables and Consumer Goods that persisted to be the succor for the preceding months marked flattish growth for July 2012 in the range of about 0.5-1.5%. Growth for the segments witnessed healthy growth of 9.1% and 3.5% respectively in June. Consumer Goods and Consumer Durables grew at 3.3% and 6.3% during the April-July period of FY13 which outpaced the Capital Goods, Basic Goods and Intermediate goods that witnessed growth of (16.8)%, 3% and 0.3% respectively during the said period.

Source : Equity Bulls

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