PremiumEvery Monday, Mint’s Plain Facts section features five key data releases to watch out for during the week. India’s retail inflation numbers for June will be out on Monday and will set the tone for the central bank’s monetary policy meeting early next month. The quarterly financial results of Infosys Ltd and Wipro Ltd are also due this week. The global markets will await inflation numbers from the US as well as China’s economic output data. Here are the five big numbers to track:
1. Loanbook growth
The Reserve Bank of India (RBI) will release data on credit and deposits of commercial banks for the fortnight till 2 July this week. Loanbook growth has been subdued for over a year as an uncertain outlook keeps lenders as well as borrowers circumspect. Conversely, deposit growth has outpaced loan growth since September 2019, resulting in a sinking loans-to-deposit ratio, which stands at 71%.
In May, credit to medium-sized industries stayed robust, while agricultural credit growth, though still strong, slowed marginally. The growth in industry and services segments has been muted because of the weak sentiment. In general, credit offtake tends to be a tad weak in the first quarter of a fiscal year.
Some relief could flow from the government’s decision to extend credit schemes to assuage the stress of some covid-hit sectors. Analysts expect credit growth to turn the corner by the second half of this fiscal year as economic recovery gathers pace.
[
2. IT earnings
Three major information technology (IT) firms will announce their June-quarter earnings this week: Infosys on Wednesday and Wipro and L&T Infotech on Thursday.
The IT sector is banking on a strong momentum on deals to lift revenue growth to pre-pandemic levels, while annual salary increments for staff and higher attrition could be a headwind, analysts said. Expansion of its digital capabilities has helped Infosys register stable performance during the pandemic. The country’s second-largest software services company is likely to revise its revenue growth guidance upwards for 2021-22, riding on large deal wins.
Wipro’s revenue is also expected to gain heavily from its acquisition of Capco, a UK-based consultancy, while L&T Infotech could have a seasonally weak growth and a dip in margins.
The results will be closely watched by investors as they review their bets in the resilient IT sector. The BSE IT index climbed 13.5% in the June quarter, with Infosys gaining 15.6% and Wipro 31.7%, far ahead of the Sensex, which rose 6%.
3. India inflation
Retail inflation data for June is due on Monday. As in other parts of the world, inflation has become a major headache. In May, prices rose 6.3% on year, the first time in 2021 that it crossed the Reserve Bank of India’s (RBI’s) upper limit. Wholesale inflation data is also due on Wednesday, and will show the extent of input price pressures.
The surge in fuel prices is set to continue, driven by rising crude prices globally. Prospects of a good monsoon and curtailed demand during the second covid-19 wave have kept food prices under check so far in India, but this could change. The UN’s food price index rose to a decade-high in May, and India may begin to see impact. Rise in procurement prices could also add to inflationary pressures.
If inflation picks up further, the debate on the growth-inflation tradeoff will only become sharper ahead of the next monetary policy committee meeting in early August.
4. China GDP
China’s National Bureau of Statistics will release the GDP figures for the June quarter on Thursday. Economic output had grown 18.3% year-on-year in the March quarter, thanks to an ultra-low base. This number will slide down as the base effect withers away, but in sequential terms, China is all set to stay on course.
Inflation is rising as the economy recovers fast, and high export demand from advanced countries is keeping China’s economic indicators propped up. A Nikkei survey held last week forecast 7.7% year-on-year growth in the June quarter. This would be 1.4% in sequential terms, faster than 0.6% in the previous quarter.
China is showing growing signs of consumer confidence and its labour market is improving fast. Consumption recovery is still a missing link, but with vaccinations picking up, that, too, is likely to start gaining strength.
5. US inflation
Surging consumer prices have begun to rattle central banks across the world. In the US too, policymakers are finally taking note of it after headline inflation soared to a 13-year high in May.
The economic recovery in the US has been rapid, and has driven up demand for goods and services while supplies remain choked. In its last meeting in June, the Federal Reserve agreed it should be ready to act on inflation risks when they strengthen, but the time was not yet ripe: unemployment was still high, and economic uncertainties remained.
Over the past few weeks, bond yields have settled down after their early panic, possibly buying into the Fed’s wait-and-watch stance. The June data is due on Tuesday. If inflation stays above target despite a waning base effect, it could well lead to a more hawkish stance from the Fed later this month, ringing alarm bells across emerging markets that have been beneficiaries of a loose Fed policy.
Never miss a story! Stay connected and informed with Mint. Download our App Now!!