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Economy

IIP for July 2013 at 2.63%, Capital Goods Surprises, Consumer Durables Frightens

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The Index of Industrial Production (IIP) for July 2013 was revealed to be at 2.63% over July 2012. This is a huge improvement, and long term readers of Capital Mind will know how much I trust this data. (For short term readers: I don’t).

IIP Chart India

And this is preliminary data – it will be revised a month later and then two months later.

Revisions: Data for earlier months has been revised, both up and down!

Manufacturing and Electricity Save The Day

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This data will change with revisions. However, even with this “increase” we are still growing at very low percentage points (even lower than GDP growth). This looks like a sorry picture.

Consumer Durable Destruction Is Scary, Capital Goods Up 15%

Looking at things from a use-based angle, the real problem is visible in the Consumer Durables angle, which is down 9% from the previous year.

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This has implications in multiple ways – first, that we’re not producing that many durables any more (and probably importing them?). Second that we are probably cutting down on durables (like fridges and a/cs, mostly discretionary buying as compared to essentials) because inflation and high interest rates are slowing down growth, causing a crunch in spending, so we go to the essentials instead.

The increase in capital goods to 15% is the biggest print in two years. This should, at the very least, increase interest in the big capital goods companies (BHEL, L&T, Siemens, Infra companies).

Rumours were that this would be a bad IIP. The market closed down over 1% today. I expect we will go back up tomorrow, at least initially, until it strikes us that wait, even 2.6% is a horribly low number.

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