Feb IIP numbers clearly point to a slowdown

Month's figures at 4.1% vs market expectation of 6.6%. Jan numbers sharply revised from 6.8% to 1.1%

IIP (Index of Industrial Production) numbers announced by the government has been lower than the market expectation. For the month of February 2012 IIP number stood at 4.1% as against a market expectation of 6.6 %.

Assumptions of a 6.6% growth were on a base of 6.8% growth in January 2012. But the statistical department revised the number for January 2012 sharply from 6.8% to 1.1%.  Based on these facts there seems to be a reasonable growth in IIP.

This was on account of wrong data forwarded by the Ministry of Consumer Affairs. Sugar production was wrongly taken at 13.41 million tonnes, as compared to 5.81 million tonnes.

The Capital Goods sector, which has been suffering from a slowdown, has posted a sharp growth of 10.6% in February 2012 over previous year. However, this is on account of a lower base, as February 2011 had seen a sharp drop. Compared to January 2012 there was a marginal growth of 1.1%. Looking deeper in the numbers, most of the balancing equipments have shown a growth in the segment, indicating companies are resorting to repairs rather than fresh asset creation.

Inflation seems to have caught up on consumer goods as the sector has witnessed virtually no growth, both on a year-on-year and month-on-month basis. Consumer durable on the other hand has slowed down on a year-on-year basis while consumer non-durable has seen a sharp slowdown, thanks to the wrong set of sugar production data. 

All four sectoral indices are showing a slowdown on a month on month basis as can be seen from the chart. However, on a year on year basis there is an improvement in electricity (largely on account of a lower base).

The numbers clearly show a slowdown in almost all fronts in the economy. The ball is now in the central banks court, all eyes will be on the governor to see if he reduces interest rates to prime the economy.