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 Economic activity appears to have remained weak in July and the three-month low manufacturing PMI, falling water reservoir levels, weak growth in freight traffic and CV sales and declining PV sales were only partly offset by better rail passenger traffic and power generation, Motilal Oswal Financial Services said in a research.

Economic activity weakened in Jun'23 also. Preliminary estimates indicate that the growth in India’s EAI for GVA decelerated to its eight-month low of 6.4 per cent YoY in Jun’23.

The deterioration was led by the non-farm sector, as industrial sector growth slowed to 8.7 per cent YoY in Jun’23  and the growth in the services sector too moderated to its eight-month low of 6.0 per cent YoY in Jun’23.

Our estimates suggest that EAI-GVA growth in 1QFY24 weakened to 7.4 per cent YoY, from 8.1 per cent YoY in 4QFY23 and 14.9  per centYoY in 1QFY23, the report said.

EAI-GDP also grew 3.7 per cent YoY in Jun’23 marking below-4 per cent growth for the fourth successive month.

While consumption growth improved to four-month high of 5.1 per cent YoY in Jun’23, investments growth decelerated to its eight-month lowest level of 5.4 per cent in Jun’23.

Consumption growth improved in Jun’23. The total consumption growth was 5.1 per cent YoY in Jun’23. This was largely led by an increase of 7.5 per cent YoY in government revenue spending during the month (- 27.6 per cent in May’23).

While auto sales and petrol sales declined, they were partly offset by 42-month high growth in personal credit, the report said.

Private consumption, thus, grew 4.5 per cent YoY in Jun’23 vs. 6.2 per cent in May’23.

Investments growth stood at an eight-month low: According to our estimates, investments grew 5.4 per cent YoY in Jun’23 vs. 8.1 per cent YoY in May’23. A decline in capital goods imports and weak diesel sales, and an expected slowdown in IIP for capital goods are the key drivers of weak investments growth in Jun’23.

External trade took away 1.2pp from EAI-GDP growth, as real merchandise exports fell faster than real imports.

Weak non-farm sector dragged EAI-GVA growth. EAI-GVA details suggest that the industrial sector grew at a three-month low of 8.7 per cent YoY in Jun’23. At the same time, the growth in the services sector too moderated to the lowest in eight months.

Thus, the non-farm sector increased 6.9 per cent YoY in Jun’23, following 9 per cent growth in the previous two months.

Within the services sector, 15-month slowest growth in auto sales, first decline in freight traffic in 13 months, and three-month lowest PMI were the key drags, the report said.