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MOSL: ECOSCOPE-IIP growth slides to 17-month low off an adverse base-Expect GDP growth to decelerate in 3QFY19

ECOSCOPE: IIP growth slides to 17-month low off an adverse base; Expect GDP growth to decelerate in 3QFY19

 

• Index of Industrial Production (IIP) rose by just 0.5% YoY in Nov’18, as against 8.4% in the previous month and also much lower than our estimate/market consensus of 3.8%/3.6%.
• IIP growth was the slowest in 17 months, with a broad-based deceleration in industrial activity. Manufacturing activity contracted by 0.4% in Nov’18, after rising in each of the last 16 months. 13 of the 23 sub-industries witnessed a YoY slowdown in activity, and notably, as much as 87.9% of the manufacturing sector (by weight) reported sub-5% growth in the month. Mining and electricity growth also slowed down sharply.
• According to the use-based classification, output of capital goods fell by 3.4% YoY, while that of consumer goods and intermediate goods declined by 0.7% and 4.5%, respectively.
• IIP growth weakened to 4.4% in Oct-Nov’18 from 5.3% in 2QFY19. We expect IIP growth to remain subdued in the near term on account of an adverse base. Overall, we expect real GDP growth to weaken toward ~6.5% in 3QFY19, implying ~7% growth in FY19, lower than market consensus and the RBI’s projection of ~7.4%.