India Macro Weekly: IIP growth accelerates, CPI inflation high


For the week ending January 13, 2018:
  • Growth in the Index of Industrial Production (IIP) picked up unexpectedly to 8.4% in November, 2017. Manufacturing led IIP growth, as did infrastructure/construction goods and consumer goods.
  • Consolidated corporate results for Q2, 2017-18 also showed robust sales performance, though net profits continued to languish. Containment in expenditure growth was achieved on account of softening in raw material costs. Manufacturing sales were particularly buoyant, while IT led net profits’ growth.
  • The price front was disappointing as inflation based on the Consumer Price Index (CPI) rose further to a 16 month high of 5.2% and core inflation crossed 5% as well, suggesting a hardening in underlying inflationary pressures. With global fuel prices staying elevated above USD 60/bbl, inflation is expected to continue to remain relatively high. 
  • Asset price inflation also continues in equity markets, as both the Sensex and the Nifty 50 continued to rise. The former saw an average level cross 34,000 during the week, while the level rose above 10, 500 for the latter. 
  • Reciprocally, bond markets continued to show weakness as the 10 year government bond yield rose for the seventh consecutive week, staying well over 7%.
  • The USD/INR exchange rate depreciated, but remained at sub INR 64 levels.

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