IIP surprises negatively, declines 2.2% - Angel Broking

As per Quick Estimates on the Index of Industrial Production (IIP), industrial growth in June 2013 declined by 2.2% in contrast with market expectations of 1.2% degrowth. The production data continues to reflect weakness on the demand-side from investment as well as consumption. The index for May 2013 has been revised downwards considerably by 120bp owing mainly to revision in manufacturing production. Consequently, IIP growth for May 2013 has been revised to a decline of 2.8% as compared to 1.6% de-growth reported earlier. The IIP growth for 1QFY2014 has declined by a sharper 1.1% on the back of a 0.3% decline in the corresponding period of FY2013 and 2.2% growth in 4QFY2013. We believe that a sustainable recovery still looks far and expect a modest pick-up in growth in 2HFY2014.

Performance on Sector-wise classification

In terms of sector-wise classification, electricity production remained flat but decline in production in mining and manufacturing sectors weighed on overall output. The Mining sector continued to contract for the ninth consecutive month and reported a 4.1% decline in June 2013 as against a 1.1% contraction in the corresponding period of the previous year. The Manufacturing sector reported a decline for the second straight month and came in at 2.2%.

Performance in the Use-based category

As per the use-based classification, Consumer Durables continued to weigh heavily on the overall IIP. The decline of 2.3% in Consumer Goods production can be attributed to the sharp 10.5% contraction in Consumer Durables. Growth in consumer non-durables picked up to 5% as compared to 0.5% contraction in June 2013. The Capital Goods index posted a 6.6% decline despite a low base since it had contracted by almost 28% in the corresponding period of the previous year.

Source : Equity Bulls

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