Factory goods output was surprisingly firm in May. Annual growth of 1.2 percent was comfortably above market expectations and the strongest outturn since February. However, April's decline was steepened to 1.4 percent.
The rebound in overall production was mirrored in manufacturing where the rate climbed back into positive territory at 0.7 percent. Growth in mining and quarrying was 1.3 percent and electricity saw a 4.7 percent rate.
June was possibly a better month if the manufacturing PMI (51.7 after 50.7) is anything to go by but overall the sector's recent performance has been disappointing. In fact, total industrial production in April/May was still 0.1 percent below its year ago level and calls from industry for a cut in official interest rates will not go away. However, one hurdle to this, RBI Chief Raghuram Rajan, leaves his post in September, less than a month after the central bank's next policy-setting meeting on 9th August. His successor, expected to be named very soon, is almost certain to be more dovish.
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.