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MOSL: ECOSCOPE-Economic activity weakened again in May’19; Expect 1QFY20 GDP growth to remain sub-6%

ECOSCOPE: Economic activity weakened again in May’19; Expect 1QFY20 GDP growth to remain sub-6%

 

• Our in-house Economic Activity Index (EAI) for India's real GDP (called EAI-GDP) suggests growth of 4.5% YoY in May'19, weaker than 4.8% growth a month ago in Apr'19 and 8.6% a year ago in May'18. The deceleration in EAI-GDP was driven by weak consumer spending, as investments grew at 7-month highest pace of 2.1% in May'19. External trade dragged EAI-GDP growth for the second consecutive month in May'19.
• EAI-GVA index also posted slower growth of 5.8% in May'19, compared to 6.5% in Apr'19. It implies that EAI-GVA grew 6.2% in the first two months of 1QFY20, compared to 6.8% in the corresponding period a year ago. Weaker growth was almost entirely on account of weak services, which grew only 6.4% vis-à-vis 8.2% growth a month ago. Industrial sector, on the contrary, is expected to grow at 5-month highest pace of 5.6% in May'19 due to an expected recovery in the manufacturing activity.
• Overall, India's economic activity continues to remain feeble in May'19. The three-month moving average (3mma) dropped to 5.6% in May'19, the slowest in more than two years. We continue to expect real GDP growth at sub-6% for the second consecutive quarter in 1QFY20 and project ~6.5% growth for FY20, lower than 6.8% in FY19.