01-01-1970 12:00 AM | Source: Choice Broking Pvt Ltd
IIP and CPI - Industrial activity slows down By Choice Broking
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Industrial activity slows down’

*  IIP grew at subdued pace of 1.4% in Nov (4.0% in Oct) due to broad based slowdown in activity across sectors.

* Muted growth in industrial activity indicated that demand momentum faded post the festival season.

* Manufacturing sector grew at 9-month low of 0.9% in Nov as compared to 3.1% in Oct.

* Output growth in mining/electricity sectors also eased to 5.0%/2.1% in Nov.

* Investment and demand remained weak in Nov

* CPI inflation rose to 5-month high of 5.6% in Dec v/s 4.9% in Nov due to sharp rise in food inflation.

* Fuel & core inflation continued to remain in elevated level

* CPI index contracted by -0.4% on MoM basis, indicating broader decline in prices on sequential basis.

IIP growth slips to 9-month low of 1.4% in Nov

Indian Industrial Production (IIP) grew by a subdued pace of 1.4% in Nov due to slowed activity across the sectors. Muted growth in the factory output indicated that demand momentum faded post the festival season. Manufacturing sector, which comprises 77.6% of IIP index, grew by 9-month low of 0.9% in Nov as compared to 3.1% in the previous month. In terms of industries, 12 industries reported positive growth in Nov out of the 23 industry groups. Output growth in mining/electricity sectors also eased to 5.0%/2.1% in Nov v/s 11.5%/4.0% in Oct. On use-based category, consumer durables contracted by -5.6% (-3.6% in Oct) indicating decline in urban demand. Activity of capital goods contracted by -3.7% for the second consecutive month (-1.5% in Oct), while infrastructure grew by 3.8% during the reported month. On cumulative basis, IIP grew by 17.4% over Apr-Nov FY22 v/s - 15.3% in the same period of previous fiscal.

Industrial activity contracted by -4.7% on MoM basis which indicated sharp deceleration in demand post festival season. Adding to woes, slowdown in activity was broader across sectors despite the favourable base (IIP contracted at -1.6% in Nov-20) and index in Nov once again fell below pre-Covid level. Manufacturing output growth remained nearly flat at 0.9% despite having low base. Contraction in capital goods & consumer durables sectors indicating weakening of demand and investment in the economy. Poor performance of Indian auto sector, coal supply issue and decline in demand post festival amid worry over inflation were among the key reasons attributed for weak output. Industrial activity momentum is expected to remain weak in coming months amid worries over Covid new variant Omicron which further induced some restrictions on localised level.

 

CPI inflation rises to 5.6% in Dec

CPI inflation rose to 5-month high of 5.6% in Dec v/s 4.9% in Nov due to sharp rise in food inflation. CFPI, comprises 47.3% in CPI index, shot up to 4.1% in Jan (from 1.9% in Nov) because of easing of deflation in vegetables (-3.0% in Dec v/s -13.6% in Nov) and high prices of milk, protein items and sugar. Fuel inflation remained in double digit at 11.0% in Dec (13.4% in Nov) leading to high inflation in transport at 9.7%. Core inflation, excluding fuel and food, remained elevated at 6.2% in Dec due to high commodity prices.

Inflation in Dec at 5.6% came below the market expectation of ~5.8%. Food inflation rose to 6-month high, while elevated fuel & core items prices are exerting upward pressure to headline number. Meanwhile, inflation in Dec remained within the RBI target range of 4-6%. Unfavourable base also contributed to increase in inflation. CPI index contracted by -0.4% on MoM basis, indicating broader decline in prices on sequential basis. Inflation is expected to remain with the RBI target range in the remaining months of this fiscal. Key upside risk to inflation is the possibility of supply chain challenges due to the emergence of the third pandemic wave in the country.

 

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