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Published on 14/11/2018 1:24:42 PM | Source: Choice Broking Pvt Ltd

IIP grows at 4.5% in Sep 2018; CPI inflation eased to 3.3% in Oct 2018 - Choice Broking

Posted in Special Event Reports| #IIP #Special Report #Inflation #CPI #Choice Broking

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IIP grows at 4.5% in Sep 2018; CPI inflation eased to 3.3% in Oct 2018

*  IIP grows at 4.5% in Sep v/s 4.7% in Aug

*  Manufacturing growth eased to 4.6% in Sep v/s 5.1% in Aug. Manufacturing activity in Sep was impacted by floods in parts of country

*  Mining sector witnessed modest improvement (0.2% in Sep v/s -0.5% in Aug) while electricity sector grew at 8.2% in Sep v/s 7.6% in Aug

*  Consumer durables and capital goods sectors reported sluggish performance, while steady growth in non-durables sector indicates building momentum in rural demand

*  CPI inflation eased to 13-month low of 3.3% in Oct v/s 3.7% in Sep

*  Deflation in key food items put downward pressure on inflation. Vegetables, sugar and pulses continue to witness deflationary trend. Inflation in fruits dipped to 0.4% in Oct v/s 1.7% in Sep

*  Core-inflation hardened to 3-month high of 6.1% in Oct v/s 5.7% in Sep.

*  Recent easing of crude oil prices and rupee appreciation will ease fuel inflation

 

IIP grows by 4.5% in Sep

Factory output growth, measured by IIP index, grew by 4.5% in the month of Sep v/s 4.7% (revised) in Aug and 4.1% in the same month of previous fiscal. While the growth in manufacturing and electricity sectors remained steady, poor mining activities had impacted industrial production. Mining sector grew by 0.2% in Sep v/s (-)0.5% in Aug due to the muted natural gas production. However coal production increased by 6.4% in Sep despite unfavorable base of 10.4% growth in year ago period supported mining sector growth. Manufacturing sector, having 77.6% weight in index, expanded by 4.6% (5.1% in Aug) due to impact of disruption caused by floods in some parts of country. In terms of industries, 17 out of the 23 industry groups showed positive growth. The output of electricity sector improved to 8.2% in Sep compared to 7.6% in Aug. On use based classification, growth in consumer durables sector remained subdued at 5.2% (-4.1% in Sep’17) despite the favorable base effect showing the impact of high crude oil prices and rupee depreciation on urban demand. Output of capital goods also reduced to 5.8% in Sep v/s 9.3% in Aug showing some deterioration in investment sentiments. Infrastructure sector grew by 9.5% in Sep (8.0% in Aug), however it was supported by favorable base effect.

 

CPI inflation eased to 3.3% in Oct

CPI inflation or retail inflation eased to 13-month low of 3.3% in Oct v/s 3.7% in Sep driven by deflation in food items. Consumer Food Price Index (CFPI), which represents 47.2% weight in the index, reported at (-)0.9% in Oct as compared to 0.5% in Sep due to deflation in vegetables (-8.1% in Oct v/s -4.2% in Sep), pulses (-10.3% in Oct v/s -8.6% in Sep). Inflation in fruits reduced to record low level to 0.4% in Oct v/s 1.7% in Sep. Fuel inflation remained steady at 8.55% in Oct v/s 8.6% in Sep due to the high crude oil prices. Inflation in rural reported at 2.8% in Oct (3.3% in Sep) and in urban area at 4.0% (4.3% in Sep). Meanwhile coreinflation hardened to 3-month high of 6.1% in Oct v/s 5.7% in Sep.

 

Outlook

*  IIP growth at 4.5% in Sep came in line with the market expectation due to better performance by electricity and manufacturing sector. Increase in manufacturing PMI (53.1 in Sep v/s 52.2 in Aug), improvement in auto production growth (20.8% in Sep v/s 8.0% in Aug) and pick up in thermal electricity generation to boost performance of manufacturing and electricity sector. Further, building traction in domestic coal production will improve the mining sector performance. On use based, steady momentum of non-durables sector’s growth shows the building momentum of demand in rural India. Easing crude oil prices and rupee appreciation will also provide support to the broad based demand.

*  Food index entered into the deflationary trend due to prevailing deflation in key food items such as pulses, sugar and vegetables. Food inflation is likely to remain low due to adequate reservoir storage and increasing agriculture sector’s output. Core inflation continued to exert pressure due to high commodity prices. Meanwhile the recent easing of crude oil prices and rupee appreciation will ease fuel inflation and keep headline inflation under check in the coming months.

 

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