Indian Economy: Monthly Macro Dashboard

27 Sep 2023 , 10:16 AM

Highlights: 1) A number of industrial-activity indicators show pickup in Jul/Aug — coal/cement/steel production, PV volumes (mainly led by dealer stocking), freight traffic, fuel & electricity consumption, etc. 2) Rural still depressed – weak tractor/ 2W sales & fertiliser consumption, high MNREGA demand, deteriorating rural consumer sentiment. 3) Brent crude above $90/bbl; but base metals and soft commodities weak. 4) INR forward premia (1M/3M/6M) has plummeted to below 1.5% vs 4-6% historically, as the US-India yield gap has narrowed significantly. 

• In July, coal/steel production clocked a healthy 14.9%/13.5% YoY, and cement production 7.1%. At 16.3% YoY, electricity consumption was strong in Aug’23. Jul’23 IIP growth rebounded to 5.7% YoY vs 3.7% in Jun.
• In Aug, the railway freight traffic was strong at 6.4% YoY (vs 1.5% in July). Similarly, port cargo traffic (7.1% YoY vs 4.6%) and port container traffic 16.7% YoY in Aug (vs 11.1% in July). With MFG 58.6 and Services 60.1, PMI surveys impressed again.
• In Aug, PV volumes rose to 9.4% YoY vs 2.6% in July. However, retails are weak while channel inventory is going up. 2W volumes were flat vs -7.2% in July. Air traffic continued its scorching pace at 22.8% YoY in Aug vs 24.7% in July. Fuel consumption growth rebounded to 6.5% YoY in Aug vs 2.1% in July.
• Rural continues to show some weakness with tractor volumes only 1.1% up in Aug, fertiliser volumes improving but up only 4% in Jul, flat YTD (note that prices have risen internationally), unemployment improving to 7% from 7.8%, MNREGA demand falling to 23mn (from 29mn and 44mn in the previous two months); but is still up 20% YoY in Aug, and Agri credit a solid 16.8% YoY in July.
• In Aug, CMIE consumer sentiment moderated slightly after steadily rising for eight months – at 95 vs 96.5 in July with decline in rural (96 in Aug vs 98.5 in Jul), more than that in urban (92.3 in Aug vs 92.8 in Jul).
• Aug’23 trade deficit came in at $24bn, higher than $18.5bn in July showing domestic growth strength vs export weakness. FX reserves moderated a bit, coming in at US$ 595bn in Aug.
• M3 grew by 10.8% YoY in Aug and CD ratio increased to 77.2 (exHDFC merger impact at 74.6). Ex-HDFC merger impact, deposits growth in July slightly slowed to 12% YoY, while credit growth fell to 14.7% YoY (16.3% in Jun). At 5.2%, industry credit struggled again.
• Thanks to the falling vegetable prices, India CPI inflation cooled a bit to 6.8% YoY, in Aug’23. Core (ex-food, fuel, energy, gold) rose to 4.6% sequential SAAR after four sub 4% months. US & Euro Core CPI inflation continued to decline. US retail sales were again flattish in real terms; consumer sentiment still weak and money supply has shrunk nine months in a row. However, US Fed has raised the growth forecast and continues its higher for longer stance.
• Brent climbed up further, to 94; but base metals and soft commodities are weak – LME at 3,690 vs 3,718 in Aug and around 4,000 levels at the CY’s outset; CRB food index at 548 levels vs the recent high of 577 in Jul. DXY is back to 105 levels. INR has been stable, but other EM currencies have declined 4%.