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MOSL: ECOSCOPE-IIP declines for the first time in 26 months; Pick-up in 2QFY20 GDP growth could be lower than previously expected

ECOSCOPE: IIP declines for the first time in 26 months; Pick-up in 2QFY20 GDP growth could be lower than previously expected

 

• The decline in IIP in Aug’19 (-1.1% YoY) was the first in 26 months and also the worst since the new base series began in FY14. The number is lower than market consensus of +1.7% and our estimate of +2.5%. However, IIP growth for Jul’19 has been revised upward to 4.6% from 4.3% and that for May’19 has been revised marginally downward to5% from 4.6%.
• The decline in IIP was largely driven by a record fall of 21.0% YoY (since the new series began) in capital goods production in Aug’19. In fact, this is the eighth consecutive month of a fall in capital goods production. Besides, infrastructure and construction activity declined 4.5% YoY in Aug’19 compared to growth of 3.5% in the previous month.
• While manufacturing goods (IIP weight: 77.6%) production declined 1.2% YoY in Aug’19, electricity (IIP weight 7.9%) generation too was down 90bp YoY in the month. Mining (IIP weight 14.4%) activity did not grow at all in Aug’19.