India’s industrial production disappoints with 0.4% YoY

Capital goods output was a factor.

India’s August industrial production (IP) disappointed at 0.4% YoY vs consensus at 2.7% and unchanged from 0.4% (revised) the month before.

According to a research note from DBS, on seasonally adjusted MoM terms, output fell 0.5% from 1.3% in Jul, lower than expectations of over 1% rise.

The key drag on headline IP growth was the -11.3% drop in the capital goods output (Apr-Jul’s 9.3%) together with consumer non-durables slipping back into red.

The capital goods segment is routinely bulky and volatile (see chart), and has distorted headline IP growth in the past.

Excluding this category, IP rose 2.1% in Aug, not far from 2.5% average in the previous four months.

On the use-based end, manufacturing fell 1.4% (Apr-Jul’s 2.4%), while mining output rose 2.6% and electricity generation stayed firm at 12.9% (Apr-Jul’s 11.5%).

Here’s more from DBS:

This data poses downside risks to the September quarter GDP numbers from Jun quarter’s 5.7%.

Manufacturing production has declined -1.2% in Jul-Aug, down from 3.5% in the Jun quarter, but infrastructure related industries like mining and power generation are showing signs of recovery.

As it stands, our aboveconsensus GDP call for FY15 rests on a strong rebound in second half of the year, but a soft patch is likely in the September quarter growth numbers.

This might prick some of the optimism on the domestic reform and revival expectations.

Next, we pan over to today’s CPI inflation and Tue’s WPI inflation releases. September CPI inflation is likely to slow to 7.1% YoY from 7.8% the month before.

WPI should edge to 3.0% from 3.7% in Aug. Apart from favourable base effects, easing food inflation will be a significant dampener for the headline CPI.

High frequency data show that vegetable prices (average of three widely used varieties) moderated to 8% YoY from 23% in the prior two months.

Imported price pressures have also waned as the impact of the slight rupee depreciation will be more than offset by easing global crude prices.

Brent crude prices dipped to a near two-year low by late-Sep, undershooting the Reserve Bank of India’s (RBI) baseline assumptions for the inflation outlook.

At the same time, service sector prices have eased to sub-6.0% in Aug from 6.7% between Apr-Jul14.

Notably, even as gradual disinflation is underway, the influence of base effects will exaggerate the pace of slowdown until November.

Reaching the people who run Asia's businesses is harder than it used to be.

Inboxes are crowded. Attention is short. The executives you most want to reach — the founders, CFOs, and operators who actually move budgets — are the hardest to find through the usual channels. If you're building a company, a category, or a reputation, you already know this.

We've spent twenty years building the room they read. Singapore Business Review is where senior decision makers in Singapore and across Southeast Asia come for business coverage they can't get elsewhere — in print, online, and in person at the summits and roundtables we host across seven markets.

If you have something these readers should know about — a point of view worth publishing, a product worth their attention, an event worth their time — we'd like to hear what you're trying to do.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia