Industrial output slips to 0.6% in February

Manufacturing grew at 2.2% from a year earlier, growth driven by a big jump in output of capital goods

Industrial production barely grew and was at 0.6% in February from a year earlier, government data showed on Friday.

Revised data for January showed production at factories, mines and utilities remained unchanged at 2.4%.

In the April-February period, industrial production expanded an annual 0.9%.

Manufacturing, which constitutes about 76% of industrial production, grew 2.2% from a year earlier, the federal statistics office said.

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Mining sector contracted by 8.1% in February 2013 over its level in February 2012 while the electricity sector contracted by 3.2% over its level in the corresponding period in the previous year.

The cumulative growth in the three sectors during April-February 2012-13 over the corresponding period in the previous year was -2.5%, 1% and 4% respectively.

The basic goods sector contracted by 1.8%, capital goods grew by 9.5% and intermediate goods contracted by 0.7%.

The growth in consumer durables and consumer non-durables was - 2.7% and 2.9% respectively, with the cumulative growth in consumer goods being 0.5%. The production of capital goods is rising after its consequent fall for nine months in a row. 

"I'm glad it's not negative, it's very low, not anything that one can point to as indicating a robust return of growth," said Montek Singh Ahluwalia, who heads the government's main economic planning body.

February's growth was driven by a big jump in output of capital goods - a measure of investment. But economists were wary of that indicator, which has a history of volatility.

"The big increase in capital goods output contributed to the positive IIP number, but I wouldn't say the corner has turned as there is no anecdotal evidence of new projects coming up, said A Prasanna, an economist, at ICICI Securities Primary Dealership in Mumbai.

The weak number keeps the pressure on the RBI to cut interests rates, but economists said the slight drop in consumer price inflation to 10.39% in March was unlikely by itself to convince the bank.

The previous month annual retail price inflation was 10.91%.

"More focus will be on the wholesale price data, which is out next Monday. We need to see this series easing further to raise hopes of further RBI cuts," Jonathan Cavenagh, a foreign exchange strategist with Westpac in Singapore.

Highlights:

Manufacturing growth at 2.2% vs 4.1% y-o-y

Mining growth at -8.1% vs 2.3% y-o-y

Electricity sector growth at -3.2% vs 8% y-o-y

Basic goods growth at -1.8% vs 7.6% y-o-y

Intermediate goods growth at -0.7% vs 1% y-o-y

Capital goods growth at 9.5% vs 10.5% y-o-y

Consumer goods growth at 0.5% vs -0.4% y-o-y

Consumer durables growth at -2.7% vs -6.2% y-o-y

Consumer non durables growth  2.9% vs 4.4% y-o-y

(Reuters also contributed to this story)