Factory output touches 4-month low of 4.3% in September 2018; these sectors to blame

After clocking over 6% growth rate in past two months, the India 's Industrial Production (IIP) or factory output slowed down in the month of August 2018. The CSO presented IIP data for August month, under which the factory output has decelerated to 4.3% from previous 6.6% in July 2018 and 6.9% in June 2018. With the, IIP data has touched a four-month low. In April 2018, IIP was at 4.5%. 

Quick Estimates of IIP with base 2011-12 for the month of August 2018 stands at 127.4, which is 4.3% higher as compared to the level in the month of August 2017. 

Cumulative growth for the period April-August 2018 over the corresponding period of the previous year stands at 5.2%.

source: tradingeconomics.com

Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of August 2018 stand at 92.2, 129.8 and 167.2 respectively, with the corresponding growth rates of (-) 0.4%, 4.6% and 7.6% as compared to August 2017. 

Cumulative growth in these three sectors during April-August 2018 over the corresponding period of 2017 has been 3.9%, 5.4% and 5.8% respectively.

 In terms of industries, sixteen out of the twenty three industry groups in the manufacturing sector have shown positive growth during the month of August 2018 as compared to the corresponding month of the previous year. 

The industry group ‘Manufacture of furniture’ has shown the highest positive growth of 29.2% followed by 18.9% in ‘Manufacture of wearing apparel’ and 12.7% in ‘Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials’. 

On the other hand, the industry group ‘Printing and reproduction of recorded media’ have shown the highest negative growth of (-) 19.2% followed by (-) 17.0% in ‘Manufacture of tobacco products’ and (-) 7.3% in ‘Manufacture of computer, electronic and optical products’.

As per Use-based classification, the growth rates in August 2018 over August 2017 are 2.6% in Primary goods, 5.0% in Capital goods, 2.4% in Intermediate goods and 7.8% in Infrastructure/ Construction Goods. 

Consumer durables and Consumer non-durables have recorded growth of 5.2% and 6.3% respectively.

The CSO said, "Along with the Quick Estimates of IIP for the month of August 2018, the indices for July 2018 have undergone the first revision and those for May 2018 have undergone the final revision in the light of the updated data received from the source agencies."

However, IIP data is better than what analysts had expected. 

Teresa John, Economists at Nirmal Bang had predicted, IIP growth for August 2018 to likely slow to 3.3% YoY from 6.6% in the previous month. August 2018 manufacturing PMI softened to 51.7 from 52.3 in the previous month before rising to 52.2 in September 2018.”