India: Industrial production declines for the first time in over two years
December 12, 2011
In October, industrial production contracted 5.1% over the same month last year, according to the so-called quick estimate for the index of industrial production (IIP). The subdued reading represents the first decline in industrial output since June 2009 and surprised the market on the downside, as analysts expected a more moderate 0.5% contraction. The deterioration was broadly based, albeit mainly driven by the manufacturing sector, which swung from an already weak 2.4% increase in September to an outright 6.0% contraction in October. The mining sector contracted for the third consecutive month by recording a 7.2% decrease in October (September: +7.0% year-on-year), while output in the electricity sector slowed to a 5.6% increase (September: +9.0% yoy). On a use-based classification, all categories performed worse compared to the previous month and fell into the red in October. In particular, the production of capital goods plummeted from a 6.5% contraction in September to a staggering 25.5% decline in October. In addition, the production of consumer goods swung from a 3.5% increase in September to a 0.8% contraction, amid a decline in both consumer durables and non-durables. Owing to the negative print, the trend in industrial production deteriorated, with annual average growth falling from 6.6% in September to 5.3% in October.