Factory output jumps to 3-year high in Augusthttps://indianexpress.com/article/business/economy/industrial-production-hits-3-year-high-grows-at-6-4-in-august/

Factory output jumps to 3-year high in August

The index grew at 8.4 per cent in October, 2012. After that, it has touched the highest level of 6.4 per cent in August.

Industrial production grew at nearly three-year high of 6.4 per cent in August as capital goods, manufacturing and mining activity witnessed a robust performance while consumption demand grew, as indicated by a healthy growth in consumer durables.

However, the consumer price index or retail inflation, rose to 4.41 per cent in September as against 3.66 per cent in August with food prices going up marginally, especially those of pulses, a separate set of data released by the government showed. Economists said that while retail inflation, despite the increase in food inflation, is expected to remain within the comfort zone of the Reserve Bank of India, index of industrial production (IIP), which gauges factory output in the country, is expected to show only a gradual recovery due to slowdown in external demand.

Abhishek Upadhyay, economist, ICICI Securities Primary Dealership, told Reuters that though improvement in IIP was anticipated on account of revival in mining and electricity growth seen in the core sector numbers released earlier, “there seems to have been a strong sequential increase in manufacturing growth as well, after adjusting for seasonality. This contrasts with the decline in the same metric seen last month, and should be construed favourably as it indicates a pick-up in capacity utilization levels, which is a prerequisite for recovery in the capex cycle.”

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“We still expect only a gradual recovery in industrial output in months ahead, with external demand likely to be a drag,” he said, adding that inflation will remain within the RBI forecast of 5.8 per cent for January 2016. According to the IIP data, while capital goods posted a growth of 21.8 per cent against -10 per cent during the same period a year ago, manufacturing saw a growth of 6.9 per cent and mining 3.8 per cent in August as against -1.1 per cent and 1.2 per cent, respectively, during the same period a year ago. Further, indicating a revival in consumption demand, consumer durables registered a growth of 17 per cent over -15 per cent in August 2014 while consumer goods recorded a growth of 6.8 per cent as against a contraction of 6.2 per cent in August last year.

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In terms of industries, 15 of 22 industry groups in the manufacturing sector showed positive growth during August as compared to the corresponding month of the previous year with the industry group furniture showing the highest positive growth of 90.8 per cent followed by 40.8 per cent in electrical machinery and apparatus and 19.5 per cent in wearing apparel.

With regards to the retail inflation, while food inflation rose to 3.88 per cent from 2.20 per cent in August, retail inflation in pulses and products category rose to 29.76 per cent. The price rise in the food and beverages category almost doubled from a month earlier to 4.29 per cent in September.