India Macro Weekly: WPI inflation softens, industrial outlook good

For the week ending January 20, 2018:
  • Inflation based on the Wholesale Price Index (WPI) was at 3.6%, a softening to a three month low in December, 2017, but still higher than the levels seen during the corresponding month of the previous year.
  • Merchandise trade growth remained robust, as both exports and imports increased at double digit rates in December, 2017 of 12.4% and 21.1% respectively. However, a rise in trade deficit to the highest in three years of USD 14.9bn is an indicator to watch out for in the coming months.
  • Outlook on industrial activity looks good, as the RBI’s Business Expectations Index showed improvement in both the assessment of the current situation and expectations for the future as per a survey of manufacturing firms. The expectations for Q4, 2017-18 are particularly good, as the index has reached its highest value ever of 115.9.
  • Economic activity on the ground also showed healthy trends as the foreign tourists’ report showed continued double digit growth in both foreign tourist arrivals and foreign exchange earnings in December, 2017.
  • On the asset markets’ front, crude prices continued to stay elevated above USD 60/bbl, while India’s equity markets continued to rise. The Sensex weekly average crossed 35k, while the Nifty 50 moved towards an 11k average. 10y bond yields came close to 7.5%.

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