Reuters | Mon Jul 12, 2010 | 3:17pm IST
India’s industrial output rose at its slowest pace in seven months in May, but the slower-than-forecast growth is not expected to stop the Reserve Bank of India (RBI) from raising interest rates later this month. Industrial output rose 11.5 percent in May from a year earlier, well below analysts’ forecast of a 16 percent rise and the revised 16.5 percent growth in April, data showed on Monday. Frederic Neumann, economist at HSBC in Hong Kong, said the slowdown reflected capacity constraints rather than cooling of demand. Neumann predicted that the Reserve Bank of India would follow up its unscheduled quarter-point rate rise early this month with another one at its quarterly policy review on July 27. "Slower pace of expansion in industrial output in May is not reflective of a fall in final demand. As a result, we continue to see the RBI hiking policy rates by 25 basis points," he said in a note.
Finance Secretary Ashok Chawla said industrial output was expected to keep growing at a double-digit clip in the current fiscal year to March 2011. Analysts said annual production growth has most likely peaked with the strong statistical base effect gradually fading and the latest Manufacturing Purchasing Managers’ survey for June also suggesting moderation. Among the sectors, capital goods and consumer durables were the main drivers of growth, even though the pace of expansion slackened. Capital goods output grew 34.3 percent year-on-year, down from nearly 70 percent in April, while production of consumer durables rose 23.7 percent compared with 32.7 percent in April. "Slower industrial production growth is consistent with PMI data released earlier this month…that suggest that Asian manufacturers are facing stiffer headwinds after a very strong start to the year," said Brian Jackson, senior emerging markets strategist at Royal Bank of Canada in Hong Kong. However, headline inflation is expected to have accelerated to 10.8 percent in June from 10.16 percent in May and wholesale price data on Wednesday is expected to have a greater impact on the RBI’s rate decision than output numbers.
Reuters | New Delhi | Fri Mar 12, 2010 | 3:14pm IST
Industrial output growth eased in January in line with market forecasts and analysts said it could further weaken with an expected rate hike coming on the heels of stimulus withdrawal. The Reserve Bank of India (RBI) is expected to raise its key lending rate by as much as 50 basis points in April to tame inflation that is seen galloping to 9.62 percent in February. Output grew 16.7 percent in January, below the upwardly revised 17.6 percent record growth in December and in line with a Reuters poll forecast for a 16.65 percent rise. Speaking after the data release, the finance ministry’s chief economic adviser Kaushik Basu said the reading backed his view the economy will grow over 8.5 percent in the current quarter. But analysts questioned whether the fast industrial expansion was sustainable.
"Growth at this level does not look sustainable for very very long. The base effect, the cyclical downturn, you can’t just expect people to continue to buy cars," Indranil Pan, chief economist at Kotak Mahindra Bank in Mumbai, said. "On the monetary front, the April rate hike may have an impact on (output growth) but that will not be very immediate, there will be a lagged impact." The benchmark 10-year bond yield , which was initially unmoved by the data, gradually ticked up 2 basis points with traders citing the upward revision to December’s figure as the reason for the move. Between April and January, industrial output in Asia’s third largest economy expanded 9.6 percent. It grew 2.6 percent in the year to March 2009. Manufacturing output grew an annual 17.9 percent in January, easing from 18.5 percent recorded in December.
Reuters | TOKYO | Mon Dec 28, 2009 | 12:38pm IST
Japan’s industrial output rose for the ninth consecutive month in November, driven by strong exports and domestic subsidies, but swelling inventories and falling wages threaten to end the longest climb in more than 12 years. Demand from the United States and Asia contributed much to last month’s 2.6 percent rise, government data showed on Monday, supporting the Bank of Japan’s view that the world’s second-largest economy will continue its moderate recovery next year. Economists say overseas demand should prevent a return to recession next year. However, declining wages and weak labour market may outweigh the effect of government subsidies on energy efficient goods, forcing manufacturers to curb output and start selling down inventories built up in anticipation of better sales.
“The latest data shows that Japanese makers of automobiles and home electrical appliances are still hiking their output thanks to the continuing effect of government stimulus as well as strong exports to Asia,” said Seiji Shiraishi, chief economist at HSBC Securities in Tokyo. “But a slowdown is still expected early next year as the effect of stimulus will likely fade.” Japan’s wages fell for the 18th consecutive month in November from a year earlier, in a sign that deflation, or persistently falling prices and incomes, was entrenched. This exposes the central bank to more pressure from the government to ease monetary policy further. Continue reading