The IIP expanded at 7.1%, the slowest pace in 13 months compared to the previous month’s growth of 11.35% (revised). The production index registered a growth of 8.3% on a y-o-y basis

  • The IIP was almost in line with the expectations. The market was neutral to the data release and the benchmark equity indices closed flat while the bond yields across various maturities softened

 

  • Only 13 out of 17 manufacturing sub-groups could manage a positive growth in June compared to the growth in 15 sectors last month. The index has also been revised downwards for the last month signalling a slowdown in the IIP growth

 

  • The slowdown in the production has been mainly due to moderation in capital goods production which has shown a huge correction. The data also suggest that the divergence between the capital and consumer goods might narrow down as the demand for consumer durables is picking up.

 

  • As already pointed in the report before the manufacturing production has slowed down and would moderate further because the capacity limit has already been reached and the global demand is also slowing down amid the economic uncertainty

 

  • The mining sector did not show much of drastic change and cooled down to 9.5% from 10.1% in May’10 on a mom basis while the electricity sector gave a drastic performance falling from 6.4% to 3.5% in Jun’10. Both the mining and the electricity sector are approaching towards a downward trend after peaking in Apr’10

 

  • The manufacturing sector slowed down to 7.3% in Jun’10 from 12% in the last month. After giving its best performance in Apr’10, recording a growth of 13.4% the sector has slowed down and has again came back to single-digit growth after almost about 11 months signalling a downward trend

 

  • In the use-based category the basic goods, capital goods and the intermediate goods sector registered a growth of 3.4%, 9.7% and 8.7% y-o-y respectively compared to 8.2%, 34.2% and 10.1% y-o-y respectively in the last month. All the three sectors have moderated but, it is the capital goods sector which shown one of the weakest performance

 

  • The consumer goods sector has shown a muted performance on an overall basis registering a growth of 8.3% compared to its previous month’s growth of 7.4%. Again it is the consumer durables good in this segment which like usual has given a good show increasing by 27.4% due to increased demand of durables among the masses. The non-durable section has only managed to grow by 1.3% compared to a growth of 1.4% in the last month

 

Authro:Rahul Sonthalia, Research Head, Kredent

Related posts:

  1. IIP Data: November 2009 -Index for Industrial production
  2. IIP Data: October 2009 -Index for Industrial production
  3. Industrial porduction @ 13.8% beats market expectations