India: Industrial production growth remains buoyant in December
Industrial output moderated in December from November’s outstanding performance but remained resilient and above market expectations. Factory production rose 7.1% from the same month of the previous year in December, above expectations of 6.4% growth but slightly below November’s revised 8.8% expansion (previously reported: +8.4% year-on-year). The moderation reflected a slight deceleration in manufacturing output, from 10.7% in November to 8.4% in December, which was partially offset by marginal pick-ups in mining and electricity output growth.
Employing a use-based classification, industrial production growth was driven by a very solid expansion in output of consumer non-durables and an acceleration in capital goods production growth—a traditional gauge of fixed investment—from 10.0% in November to a two-year high of 16.4% in December. That said, robust performances in these categories were outweighed by a moderation in infrastructure growth and a weaker increase in consumer durables output.
December’s stronger-than-expected industrial production data suggests the Indian economy remains on a firm recovery path in the second half of the fiscal year as distortions linked to the implementation of the Goods and Services Tax last July and demonetization in 2016 continue to wane. In addition, capacity utilization rates have already bottomed out, auto sales are growing at a solid clip and manufacturing PMI data continues to point to improving operating conditions in the sector, all of which indicate that the industrial upturn will continue in upcoming months.