IIP numbers lower than expected: Goldman Sachs

Goldman Sachs said in a report that the negative Index of Industrial production (IIP) growth of 0.4 per cent was lower than the consensus of 2.1 per cent on a year-on-year basis and their expectation of 1.2 per cent a year earlier. The monthly momentum fell by 3 per cent in October versus 1.7 per cent rise in September.

During the first six months (April-October), IIP grew 4.1 per cent versus 9.9 per cent in the same period last year.

Both consumer and capital goods slowed with growth in capital goods slowed to 3.1 per cent as compared to 10.3 per cent a year ago. Monthly momentum fell 9.1 per cent in October against 6.6 per cent rise in September. The Infrastructure Index, released on December 11, showed a growth of 3.4 per cent.

Consumer goods fell 2.3 per cent on a year-on-year basis as compared to 7.6 per cent increase in the first half of the year as growth in both consumer durables and non durables fell into negative territory due to the large impact of the global credit crunch, research report said. However, the report envisaged more weakness ahead.

"Although we were expecting IIP to be low, we did not anticipate a negative print for October. Incoming data for November is pointing towards further contraction in industrial output—preliminary exports data point to another month of negative growth while the performance of manufacturing index (PMI) has contracted sharply. We therefore expect overall activity to be sharply lower in the second half of the financial year, after growing by 7.8 per cent in the first half," the report said.

The global investment research division of Goldman Sachs said the GDP growth remains below consensus at 6.7 per cent on a year-on-year basis for the financial year 2009-10 with further downside risks, and 5.8 per cent for 2010-11.

Moreover, the report added that it continue to expect the Reserve Bank of India to ease both the repo and reverse repo rates by 150 and 100 basis points respectively by end-March 2009.