Industrial production lost a little momentum in July but only from a higher base. At 4.2 percent, annual output growth was down 0.2 percentage points versus a significantly stronger revised June rate, comfortably above expectations and the fastest since February.
Within total production the key manufacturing sector saw output 4.7 percent higher on the year, 0.7 percentage points short of its upwardly revised pace in June. Elsewhere, mining and quarrying posted a 1.3 percent annual rate and electricity a 3.5 percent yearly gain.
With July inflation already at a record low and expected to have fallen still further in August (update next week) July's surprisingly firm output figures will do little to dent speculation about a September interest rate cut from the RBI. The August manufacturing PMI (53.3) suggested a slowdown in activity rates in mid-quarter and a couple of days ago a senior government minister was pressing the central bank for a reduction of 50-100 basis points.
Industrial production index measures changes in the volume of production in the mining, manufacturing and electricity sectors. The data are not seasonally adjusted.
Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that will not lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.
The index is a quantitative index with the production of the items being expressed in physical terms. The Index is compiled by taking into account the quantities of items produced during the current month, compared with the average monthly production in the base year. Selection of items is based on the total production of the items as the primary (main) product as well as secondary (by) product. Data are available monthly within six weeks of reference month.
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