June IIP at -1.8%, Capital Goods growth mutilated

Moneycontrol Bureau

The Index of Industrial production (IIP) for the month of June has come in at a dismal -1.8%, way below the CNBC-TV18 poll estimate of 1%. The number suggests that all gains accumulated in the previous month have been wiped out. The impact of the number was felt on the stock market, which gave up morning gains. The IIP figure for the month of May, however, has been revised slightly higher to 2.5% from 2.4%.
The experts were counting on mining and electricity sectors to pull up the industrial production in June, each came in at 0.6% and 8.8% respectively. The component which dealt the severest blow to any hope of revival is capital goods. From a year-on-year perspective, capital goods witnessed a degrowth of negative 27.9% versus 38.7% recorded in previous June. Manufacturing sector too contracted at (-) 3.2% versus a growth of 2.5% in the previous month and 11.1% in the previous year. The dreary industrial output numbers may give the Reserve Bank of India reasons to cut key policy rates. Last month, RBI had left interest rates unchanged citing inflationary pressures, but cut the statutory liquidity ratio by 1% to 23%, paving the way for increased credit to industry. IIP Internals:
*Mining Sector Growth At 0.6% Vs -1.4% (YoY)
*Manufacturing Sector Growth At -3.2% Vs 11.1% (YoY)
*Electricity Sector Growth At 8.8% Vs 8% (YoY)
*Basic Goods Growth At 4.1% Vs 7.8% (YoY)
*Capital Goods Growth At  -27.9% Vs 38.7% (YoY)
*Intermediate Goods Growth At 1.6%; Unchanged (YoY)
*Consumer Goods Growth At 3.5% Vs 3.1% (YoY)
*Consumer Durables Growth At 9.1% Vs 1.6% (YoY)
*Consumer Non-durables Growth :: At -1% Vs 4.3% (YoY)