Feb-25 core sector tapers to 2.85%, as crude and natural gas contract

1 Apr 2025 , 10:50 AM

CORE SECTOR TAPERS AS HEAVYWEIGHTS SLOW DOWN

The core sector number for February 2025 had two contrasting sets of signals. On the downside, the growth number was sharply lower than the last few months at 2.85%. However, there were also substantial revisions to the previous months growth, indicating that February could eventually be much better when data is revised. The big difference between January and February was the tepid performance of refinery products, which has the highest weightage in the core basket. What about revisions? November 2024 core sector final revision saw an upgrade of 139 bps from 4.39% to 5.78%, while the first revision for January 2025 was a 49 bps upgrade from 4.59% to 5.08%.

CORE SECTOR LEADERS AND LAGGARDS IN FEBRUARY 2025

In the 8-infrastructure core sector basket, the maximum weightage is cornered by refinery products at 28.04%, followed by electricity at 19.85% and steel at 17.92%. These were relatively modest in February. While Steel showed robust growth at 5.57%, electricity was subdued at 2.83% and refinery products was almost flat at 0.75%. For February, Cement at 10.50% and fertilizers at 10.24%, were the only sectors to deliver double-digit growth.

For February 2025, the pressure once again came from crude oil at -5.17% and natural gas at -6.04%. In fact, crude oil has contracted in 9 out of the last 10 months, while natural gas has contracted for last 8 months in a row. Crude oil is the only sector, where even the average of the last 1 year has shown a contraction. In terms of infrastructure signals; cement has averaged 5.67% growth and Steel 6.61% in the last 1 year.

BREAKING DOWN THE FEBRUARY 2025 CORE SECTOR GROWTH

The table captures the breakdown of the +2.85% core sector growth for February 2025 across 8 major sectoral components.

Months	Overall (%)	Coal (%)	Crude (%)	Natural Gas (%)	Refinery (%)	Fertilizers  (%)	Steel  (%)	Cement (%)	Electricity  (%)
Feb-24	7.06	11.57	7.93	11.19	2.63	-9.50	9.44	7.82	7.59
Mar-24	6.25	8.70	2.07	6.30	1.59	-1.27	7.53	10.58	8.62
Apr-24	6.94	7.51	1.73	8.56	3.92	-0.76	9.83	0.16	10.24
May-24	6.86	10.20	-1.14	7.51	0.50	-1.66	8.94	-0.63	13.74
Jun-24	5.00	14.78	-2.62	3.27	-1.54	2.45	6.31	1.79	8.58
Jul-24	6.27	6.82	-2.92	-1.27	6.62	5.31	6.99	5.12	7.94
Aug-24	-1.45	-8.05	-3.44	-3.61	-1.03	3.15	4.13	-2.53	-3.72
Sep-24	2.44	2.64	-3.87	-1.30	5.76	1.89	1.81	7.58	0.49
Oct-24	3.84	7.76	-4.85	-1.25	5.20	0.37	5.71	3.14	1.96
Nov-24	5.78	7.49	-2.12	-1.94	2.90	2.02	10.54	13.10	4.42
Dec-24	4.78	5.29	0.65	-1.76	2.83	1.67	7.26	4.64	6.17
Jan-25	5.08	4.64	-1.14	-1.51	8.31	2.96	4.73	14.62	2.38
Feb-25	2.85	1.65	-5.17	-6.04	0.75	10.24	5.57	10.50	2.83

Data Source: DPIIT (Department for Promotion of Industry and Internal Trade)

Let us look at some of the standout performers. On the downside, natural gas and oil exploration continued to witness contraction; which has been the trend for the better part of last one year. While cement continued its double-digit growth, there was a sharp turnaround in fertilizers output. However, the tepid refinery output, kept core sector growth under pressure.

HIGH FREQUENCY CORE SECTOR GROWTH (FEBRUARY 2025)

While the regular yoy growth captures long term trends, it is too sensitive to the base effect. High frequency MOM data captures the short term trends in core sector.

Core Sector Component	Weight	Feb-25 (YOY) %	Feb-25 (MOM) %	FY25 Cumulative (%) #
Coal	10.3335	+1.65%	-6.18%	+5.54%
Crude Oil	8.9833	-5.17%	-10.53%	-2.26%
Natural Gas	6.8768	-6.04%	10.37%	-0.08%
Refinery Products	28.0376	+0.75%	-9.31%	+3.07%
Fertilizers	2.6276	+10.24%	-10.14%	+2.42%
Steel	17.9166	+5.57%	-6.09%	+6.48%
Cement	5.3720	+10.50%	-2.54%	+5.11%
Electricity	19.8530	+2.83%	-4.66%	+4.92%
Core Sector Growth	100.0000	+2.85%	-6.67%	+4.37%

Data Source: DPIIT (# FY25 is 11-months data)

While high-frequency growth was positive at +6.75% in December 2024 and at +2.43% in January 2025; the pressure signals were visible in January. While in January, 4 out 8 sectors saw negative MOM growth, February has seen contraction across all 8 sectors with overall MOM core sector output contracting -6.67%. In fact, the MOM contraction has been in double digits for crude oil, natural gas, and fertilizers. It is indicative of the pressure of the global tariff regime, as well as a slowdown in capex story in India.

CHARTING LONG TERM STORY OF CORE SECTOR GROWTH

Here is a quick take on the core sector growth over last 12 financial years from FY13 to FY24. Let us first look at the 11-month cumulative data for FY25. The cumulative core sector growth for FY25 till date has been stable at 4.37%. While this is robust, it is subdued compared to 8.3% and 7.8% in the comparable 11-month period in FY23 and FY24.

If one looks at the average core sector growth of the 12 previous full fiscal years, it stands at 4.0%.  However, if the COVID year is removed, the average stands at 4.9%. The Q3 GDP data had shown pressure on capex, although the upward revision in core sector growth in recent months is a signal that Indian infrastructure may be finally getting over capex concerns!