Factory output was much weaker than expected in July. Annual growth of minus 2.4 percent was some 4.4 percentage points short of its June rate and the weakest performance since last November.
To make matters worse, the fall in overall industrial production was mirrored in manufacturing where output was down a sizeable 3.4 percent on the year. The headline data would have been worse still but for mining and quarrying (0.8 percent) and electricity (1.6 percent) where output registered modest gains.
Today's data will likely bolster calls from industry for another cut in RBI interest rates. To this end, with August inflation (see today's calendar entry) surprisingly moving to within almost 1 percentage point of the midpoint of its new 2-6 percent target band, the scope for a monetary ease next month has clearly improved. It will now be a much closer close call than seemed likely just a few days ago.
Industrial production measures the physical output of the nation's factories, mines and utilities. Data are not seasonally adjusted and the main is on the annual growth rate of total industrial production and, within that, manufacturing output. The report is usually released around six weeks after the end of the reference month.
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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