Early indicators of economic activity in July show improvement over June: Nomura
Early indicators of economic activity in July, like auto sales and electricity consumption, showed an improvement over June even as factory output contracted more sharply in July compared to the previous month, according to Nomura.
The July uptick reflected post-lockdown normalisation and pent-up demand driven largely by a recovery in rural demand, however, the continuous rise in daily cases posed a growing risk of tapering sequential improvements, it said in a report on Monday.
These concerns assume importance as not only did the country see the highest daily cases globally on Monday at 52,972 fresh cases, but the infection was increasingly spreading in rural areas which is said to be leading the recovery.
The Nomura India Business Resumption Index (NIBRI), which is a weekly tracker of the pace at which economic activity normalises, remained broadly unchanged at 70.4 for the week ending August 2. The previous week ending July 26 also showed a similar result of 70.3 over a week ending July 19 at 70.
While this freeze in NIBRI growth formed the base of Nomura’s concerns, it was 2.7 percentage points (pp) higher than June levels, the report said. However, this was still 30pp below normal activity levels, it added.
The IHS Markit manufacturing purchasing managers’ index (PMI) dropped to 46 points in July over 47.2 in June due to subdued demand on account of multiple local lockdowns across states. A reading of below 50 indicates a contraction in factory output.
Furthermore, amid worsening mobility indices over July, labour participation posted a second week of decline at 40.5% compared to 41.1% and 41.7% in the previous week and the week before that, respectively, it said.
On the other hand, unemployment levels improved to 7.2% in the week ending August 2 versus 8.2% recorded in the previous week, Nomura said.