Shocking! Factory output in India comes at just 0.5% in November; this is what hurt country's IIP

A shock wave has just hit India! Its factory output has come in at just 0.5% in November, 2018 as compared to 8.5% an year-ago month and 8.1% in October 2018. According to Ministry of Statistics & Programme Implementation (MOSPI), the quick estimates of Index of Industrial Production (IIP) or factory output stands at 126.4 in November, 2018. 

Cumulative growth for the period April-November 2018 over the corresponding period of the previous year stands at 5.0%.

Index of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of November, 2018 stand at 110.6, 127.2 and 147.2 respectively, with the corresponding growth rates of 2.7%, (-) 0.4% and 5.1% as compared to November 2017. The cumulative growth in these three sectors during April-November 2018 over the corresponding period of 2017 has been 3.7%, 5.0% and 6.6% respectively.

In terms of industries, 10 out of the 23 industry groups in the manufacturing sector have shown positive growth during the month of November 2018 as compared to the corresponding month of the previous year. 

source: tradingeconomics.com

Industry group ‘Manufacture of wearing apparel’ has shown the highest positive growth of 22.1% followed by 7.6% in ‘Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials’ and 7.4% in ‘Manufacture of other transport equipment’. On the other hand, the industry group ‘Manufacture of fabricated metal products, except machinery and equipment’ has shown the highest negative growth of (-) 13.4% followed by (-) 9.6% in ‘Manufacture of electrical equipment’ and (-) 7.3 in ‘Other manufacturing’.

As per Use-based classification, the growth rates in November 2018 over November 2017 are 3.2% in Primary goods, (-) 3.4% in Capital goods, (-) 4.5% in Intermediate goods and 5.0% in Infrastructure/ Construction Goods.  The Consumer durables and Consumer non-durables have recorded growth of (-) 0.9% and (-) 0.6% respectively.

Along with the Quick Estimates of IIP for the month of November 2018, the indices for October 2018 have undergone the first revision and those for August 2018 have undergone the final revision in the light of the updated data received from the source agencies.

The current IIP data comes surprising, as analysts had not even expected in their imagination of below 1% growth in factory output. 

For November 2018 IIP, Teresa John, analyst at Nirmal Bang said, " IIP growth is likely to come in at 4% YoY in November 2018, down from 8.1% earlier. While the October reading benefitted from a low base, the November reading will witness the adverse impact of a high base on account of a late festive season in 2018. However, the Nikkei manufacturing PMI continued its strong run in November 2018 and stood at 54, up from 53.1 earlier. It has since softened to 53.2 in December 2018."