Mixed signals: Factory output makes massive jump to 25-month high at 8.4% but CPI disappoints

By: | Updated: January 12, 2018 7:45 PM

Two macroeconomic data on Friday gave mixed signals for the economy as the factory output (IIP) surprised everyone with a massive jump of 8.4% in November as compared to 2.2% in October, but CPI disappointed at 5.21%

Mixed signals: Factory output makes a massive jump to a 25-month high at 8.4% but CPI disappoints. (Image: Reuters)

Two macroeconomic data on Friday gave mixed signals for the economy as the factory output (IIP) surprised everyone with a massive jump to a 25-month high of 8.4% in November as compared to 2.2% in October, while the Consumer Price Index, however, accelerated to a 17-month-high of 5.21% in December from November’s 4.88%, in sink with the worries expressed by the Reserve Bank of India.

The industrial output grew 8.4% in November from a year earlier, government data showed on Friday. Economists surveyed by Reuters had forecast 4.4% growth in output compared with a downwardly revised 2% year-on-year increase in October.

India’s annual retail inflation accelerated in December to a 17-month high of 5.21%, government data showed on Friday, mainly driven by faster rises in prices of food and fuel products. Analysts polled by Reuters had forecast December’s CPI inflation to rise to 5.10% from November’s 4.88%. As per the data released by the Central Statistics Office (CSO), inflation for the food basket increased to 4.96% in December from 4.42% in the preceding month.
The data revealed that eggs, vegetables and fruits became costlier, while inflation moderated in case of cereals and
pulses.

According to Richa Gupta, Senior Economist, Deloitte India said, “Inflation has risen on the back of a base effect as the overall index has fallen from the previous month’s level. The current print is unlikely to lead to any major change in RBI’s stance in the near term as inflation is likely to head downwards in the second half of the year once the unfavourable base effects wane. That said, energy and commodity prices could exert some pressure if global growth momentum pricks up from current levels.”

She, however, added that the IIP and the CPI numbers are not interrelated and have moved on the back of completely different reasons. “We should be looking at trends,” she added.

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