Factory growth rises to 9-month high in August at 4.3 per cent, retail inflation at 3.28 per cent

Industrial growth picked up in August to touch a nine-month high of 4.3 per cent as restocking of manufactured goods gained steam after the introduction of GST and the run up to the festive season, official figures show. Data released by the Central Statistics Office (CSO) on Thursday reflected signs of a turnaround in industrial production after the abysmal 0.9% growth recorded in July.

Factory output growth measured in terms of Index of Industrial Production (IIP) stood at 4 per cent in August 2016. The previous high in IIP growth was recorded at 5.7 per cent in November 2016. The output growth in manufacturing sector, which constitutes 77.63 per cent of the index grew at 3.1 per cent in August.

The output of capital goods comprising machines that produce goods and which reflect the real investment taking place in the economy grew at 5.4 per cent during the month. The output of the mining and electricity sectors grew at 9.4 per cent and 8.3 per cent as compared to August 2016. As per use-based classification, the growth rates in August 2017 over August 2016 are 7.1 per cent in primary goods, 5.4 per cent in capital goods and 2.5 per cent in infrastructure/construction goods.

Consumer durables such as refrigerators and washing machines recorded a 1.6 per cent growth rate during the month while consumer nondurables such as cosmetics, soaps and packaged foods grew by 6.9 per cent. In terms of industries, 10 out of 23 industry groups in the manufacturing sector have shown positive growth during August 2017.

The industry group 'manufacture of computer, electronic and optical products' showed the highest positive growth of 24.9 percent, followed by 16.5 per cent in 'pharmaceuticals, medicinal chemical and botanical products and 11.1 per cent in 'other transport equipment.; On the other hand, the industry group manufacture of furniture showed the highest negative growth of (-) 16 per cent.

ICRA principal economist Aditi Nayar said industrial growth strengthened appreciably in August 2017 as restocking of manufactured items gained steam.

Moreover, the mining and electricity sectors recorded healthy performances on the back of higher coal production and increased generation of thermal power, she said. The sequential improvement in industrial growth in August 2017 was broad-based, led by all three sectors- mining, manufacturing and electricityand five of the six use-based industries, Nayar added.

However, on the negative side 13 of the 23 subsectors of manufacturing with a weight of 27.0% in the IIP, recorded a contraction in August 2017. Auto sales have registered double-digit growth in September which could lead to higher industrial growth ahead as well.

RETAIL INFLATION AT3.28%

RETAIL inflation came in at 3.28 per cent in September, unchanged from August, despite softening of vegetable and cereal prices, according to government data released on Thursday. The Consumer Price Index (CPI) or retail inflation was recorded at 4.39 per cent in September 2016.

The Central Statistics Office (CSO) also revised downwards the August inflation to 3.28 per cent from 3.36 per cent. The data revealed the overall food inflation moderated to 1.25 per cent in September from 1.67 per cent in the previous month. The rate of price increase in vegetables softened to 3.92 per cent down from 9.97 per cent in August.

On the other hand, the inflation print rose in the fuel and light category to 5.56 per cent. It was 3.66 per cent in August. Retail petrol prices in Delhi have gone up 4.7 percent and diesel 2.6 percent since August 1 despite a cut in excise duty on the two fuels by the Central government. Inflation in fruits, meat & fish, and prepared meals quickened during the month. However, prices of pulses crashed by 22.51 per cent during September and eggs turned 0.15% cheaper.