The Index of Industrial Production (it is an indicator to gauge industrial activity in India) for the month of July 07 is out and it was quite a surprise. Some facts:
- The growth for July 07 (over July 06) was 7.1% much lower than 13.2% noted in June 06 (over July 05). Market expected about 9.6%.
- Figure for both Apr 07 and June 07 was revised downwards by nearly 1% each. June 07 was revised lower from 9.8% to 9% and Apr 07 from 12.4% to 11.3%. This has also been a part of trend where revision is lower.
- IIP is divided in 3 primary segments- mining, manufacturing (Mfg) and electricity. Mfg is about 80% of the index so focus lies there. It has grown by 7.2% half of 14.3% seen in Jul 06.
- Within Mfg, the maximum fall has been in wood and wood products. It has been growing at 100+% growth since Feb-07 and in Jul 07 it grew by just 21%.
- The most imp sectors in mfg (those having highest weight) are Food Products, Chemicals and Machinery. FP recorded negative growth at – 4.1%. Machinery grew by 7.7% but this is the lowest since Aug 05. From Aug 05, it has always recorded double digit (10-15) growth rates, and only in Apr 06 and Oct 06 it has been below 10% and in Oct 06 it was the lowest at about 4.5%.
- With machinery going down it implies slowdowin in capital goods, which is indeed the case as capital goods sector grows at just 13% lowest since Nov-06. Only in Apr 07 was it lower at about 11%.
So, slowdown is kicking in. As it is July data, and that time the effect of rupee appreciation would also have led to the fall. Keeping watching this space for further developments.