Industrial output slips 0.4% in September

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Revised government figures released on Monday showed August output growth was revised down to 2.3 percent from 2.7 percent.   (Reuters) Revised government figures released on Monday showed August output growth was revised down to 2.3 percent from 2.7 percent. (Reuters)
SummaryManufacturing, which constitutes about 76% of industrial production, fell by 1.5%.

Indicating persistent sluggishness in the economy, industrial production contracted by 0.4 per cent in September due dismal show by manufacturing sector and decline in consumer as well as capital goods output.

Growth in overall factory output, as measured by the Index of Industrial Production (IIP), was 2.5 per cent in September last year.

Industrial output in the April-September period this fiscal was 1 per cent, down from 5.1 per cent in the same period in 2011-12, according to the official data released today.

Meanwhile the industrial production growth rate for August this year was revised downward to 2.3 per cent from earlier provisional estimates of 2.7 per cent released last month.

The output of manufacturing sector, which constitutes over 75 per cent of the index, contracted by 1.5 per cent in September, as against a growth of 3.1 per cent in the same month last year.

The production in the manufacturing sector in April- September this year also dipped by 0.4 per cent as against a growth of 5.5 per cent growth in the same period in 2011- 12.

Capital goods output declined by 12.2 per cent in September, as against a contraction of 6.5 per cent in September, 2011.

Output of capital goods contracted in the April-September period by 13.7 per cent, as against growth of 4.6 per cent in the 2011-12 period.

However, mining output in September grew by 5.5 per cent as against a contraction of 7.5 per cent in same month last year.

The sector's production in April-September was flat as compared to a contraction of 1.6 per cent in a year ago.

Consumer goods production was down by 0.3 per cent in September as compared to a growth of 5.7 per cent in same month last year. In April-September period of this fiscal, the growth in the segment was 2.5 per cent, compared to 4.7 per cent in the first half of last fiscal.

In all, 12 of the 22 industry groups in the manufacturing sector showed growth in August.

Consumer durables production declined by 1.7 per cent in September, compared to growth of 8.9 per cent in the same month last year.

The output of these goods registered a growth of 3.8 per cent during April-September, as against 5.3 per cent in the same period last fiscal.

The consumer non-durables output growth was 1.1 per cent in September, as against 2.7 per cent in the same month last year. This segment grew by 1.4 per cent in first half of this fiscal, as against 4 per cent in the same period of 2011-12.

The basic goods production growth slowed to 3.5 per cent in September, as against 5.3 per cent the year-ago period.

During the April-September period, this segment recorded a growth of 2.9 per cent, compared to 7.3 per cent in the first half of last fiscal.

Power generation growth rate slowed to 3.9 per cent in September, compared to 9 per cent in the same month a year ago. The segment grew by 4.6 per cent in the April- September period this fiscal, as against 9.4 per cent in 2011-12.

Industrial output slips 0.4% in September

(Reuters): India's industrial production fell by 0.4 percent in September from a year earlier, a much weaker-than-expected performance.

Analysts polled by Reuters had expected a rise of 2.8 percent in September output. Revised government figures released on Monday showed August output growth was revised down to 2.3 percent from 2.7 percent.

Manufacturing, which constitutes about 76 percent of industrial production, fell by 1.5 percent from a year earlier, the federal statistics office said.

COMMENTARY

SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES, MUMBAI

This month's factory output data is a negative surprise. We were expecting a rise of 2.5 percent. But monthly industrial production data is volatile, and it is difficult to give a long-term guidance based on one month's number.

We still maintain our view that there will be some amount of industrial recovery in the second half of the current fiscal year ending in March. For the full year, we expect a rise of 4 percent.

MOSES HARDING, HEAD OF ASSET-LIABILITY MANAGEMENT, INDUSIND BANK, MUMBAI

The trend in growth and inflation is clear; downward pressure on growth and uptrend on inflation into the near term. So, no surprises from the IIP number and it is high time RBI gets into balancing act between growth and inflation.

ANJALI VERMA, ECONOMIST, MF GLOBAL, MUMBAI Typically, some kind of inventory buildup also happens in September, so the numbers are all the more disappointing.

On the other hand, CPI (consumer price inflation) continues to remain high. Going by RBI's guidance, the IIP numbers will now make a strong case for a rate cut to happen in January.

DEVEN CHOKSEY, MANAGING DIRECTOR, KR CHOKSEY SECURITIES, MUMBAI

Market is aware about it (muted IIP number) and therefore it will not get disturbed. To me, the biggest trigger would be policy decisions in winter session of parliament and rate easing by banks.

BACKGROUND

India's manufacturing growth inched up in October from September's 10-month low, supported by a pick up in new orders and an easing of price pressures.

India's services sector grew at its slowest pace in six months during October as weakness in the United States and Europe hurt orders and forced firms to hire fewer workers, suggesting the worst of the economic slump is not over yet.

The Reserve Bank of India may ease monetary policy as early as January, Governor Duvvuri Subbarao said, as price pressures ease in Asia's third-largest economy in the first part of next year on the back of slower growth.

The headline inflation likely accelerated to an 11-month high in October on costlier fuel and food, a headache for the government in a battle with the central bank over spending and high interest rates ahead of state elections.

The central bank left interest rates on hold last month but cut the cash reserve ratio for banks, defying pressure from the government to lower rates for the first time since April but also indicating it may ease policy in early 2013.

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