India Macro Weekly: Economic activity paints mixed picture

For the fortnight ending July 22, 2017:

·         Real economic activity continued to look weak as per the latest Index of Industrial Production (IIP) release for May 2017, which puts growth at a meagre 1.7%, the slowest in three months. A decline in capital goods production as well as continued weakness in consumer durables’ production are responsible for the drag down, though majority of other segments have not performed well either.

·         The merchandise foreign trade report for June 2017 still giving room for optimism as both exports and imports continue to increase. Exports grew by 4.4% and imports by a far more robust 19%. Trade deficit, too, has come off its recent highs.

·         Inflation continues to surprise pleasantly, with that based on the Consumer Price Index (CPI) coming in at low of 1.5% in June 2017.  Food price deflation led the decline, though core inflation too, is coming off.

·         Inflation based on the Wholesale Price Index (WPI) also came off to 0.9% in June 2017 on account of primary articles’ deflation.

·         The House Price Index (HPI) release for Q4, 2016-17 came in at 10.5%. HPI inflation is now at a one and a half year high, which is in contrast with recent trends in consumer price inflations, but aligns with the continued rise in other financial markets, like equities.

·         The foreign tourist report continued to be healthy, posting over 20% growth rates for the April-June 2017 quarter for both tourist arrivals as well as earnings.

·         With respect to Agriwatch, the rains are normal for the seasons as a whole. The pace of Kharif sowing also slowed down in the past week, though coverage under cotton continued to be strong.

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