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Economic data: 5 things that the numbers say
Publish date: 13th July, 2018
Inflation and industrial production are two important economic metrics that indicate how the economy is performing. On 12 July, the data regarding Industrial Production (IIP) and Consumer Price Index (CPI) inflation were released for the month of May and June respectively. Here is all you need to know.
1) IIP growth slowed down
India’s industrial output declined during the month of May according to data released by the Central Statistical Office (CSO). The Index of Industrial Production (IIP) rose by 3.2% on a year on year (YoY) basis in May. This is well below the 4.8% growth in April and the general expectations of 4.2%. This is the slowest IIP growth in the past seven months.
2) Reasons for the poor growth
The manufacturing sector, which constitutes 77.63% of the index, recorded a very low growth in April. It grew by just 2.8% compared to 2.6% in the same corresponding period last year. The power sector too witnessed a low growth. Power generation growth declined sharply to 4.2% during the month compared to a high of 8.3% last year.
3) Uptick expected in June
Experts believe that IIP growth may see an improvement in June 2018. A low base effect coupled with an improvement in power and manufacturing sectors could see an increase in industrial production.
4) CPI inflation
Consumer Price Index (CPI) inflation brings both good news and bad news. It was much lower than the expected rate of 5.3% for June but higher than the rate of 4.87% in May. This comes as a five-month high in headline inflation on the back of a rise in fuel prices.
Related:: Know the effect of inflation on your savings with our Inflation Calculator
5) Positive surprise
The positive surprise in CPI inflation was mainly led by a slower rate of price rise in the food basket. Items such as vegetables, fruits and cereals witnessed a lower than expected price spike compared to May.
Conclusion
Headline inflation is expected to moderate over the next few months due to a high base. However, volatility in global food prices due to escalating trade tensions could have an impact on inflation. Learn more about how to gauge the intensity of the current trade war here. As for IIP, experts believe that it is likely to remain on the higher side in the coming months. And once consumption growth gains momentum, there could be an investment recovery in the second half of FY19.
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