07/06/2015
India / GDP
India’s May industrial production figures are expected to validate expectations that the downturn is behind us, with the full-year figure hastening to 4-5%.
Indian financial markets will be unable to skirt the risk-off mood on Monday after Greece’s strong rejection of austerity measures over the weekend. Asian bourses are under pressure in early trade, with the euro off to a bearish start amid haven plays.
In an otherwise quiet week on the data front, India’s May industrial production (IP) numbers are due on Friday. Headline IP has risen in 12 of the past 13 months, validating expectations that the downturn is behind us and output is likely to improve on restocking needs and a rise in demand
We expect headline IP to rise 3.5% on-year in May from 4.1% the month before. Auto production and sales rose in May, before moderating into June. The earlier-released core industries index jumped to 4.4% on-year from two successive months of decline on the back of a modest upswing across the segments, mainly coal, steel and electricity generation.
Provided the gradual upturn in these infrastructure-related industries holds, this bodes well for a revival in the broader investment cycle. To affirm this trend, capital goods output also needs to extend its strong run, after the component accelerated to 11% in April from the June quarter’s 10%. Non-durables consumer goods should hold in the green, though durables output continues to underwhelm, pointing to tepid demand conditions. Lacklustre external performance will also impinge on export-oriented industries. Overall, after a 2.8% rise in the last fiscal year, we expect IP to hasten to register 4% to 5% growth this year.
