May-25 core sector at 0.71%; as cement and steel stage sharp recovery

23 Jun 2025 , 10:57 AM

MAY CORE SECTOR SUBDUED, BUT UPGRADES GIVE HOPE

Core sector growth for May 2025 at 0.71% marked the second consecutive month of sub-1% core sector growth. The core sector growth has shown a sharp fall post-March. The February final revision of core sector did not see any change at 3.36%. However, the first revision of April 2025 core sector saw a sharp upgrade from 0.49% to 0.99%. March 2025 first upgrade had raised core sector from 3.83% to 4.51% and the final revision is expected next month.

The big drivers of core sector growth in May 2025 were cement and steel, hinting at a sharp surge in construction activity. Refinery products was also in the positive, even as other hydrocarbon segments contracted. The positive growth in refinery products helped the core sector expansion in May 2025, considering it has a weight of 28.04% in core sector basket. However, 4 out of the 8 core sector categories saw contraction in May 2025.

CORE SECTOR LEADERS AND LAGGARDS IN MAY 2025

In the 8-infrastructure core sector basket, refinery products has the highest weightage of 28.04%, followed by electricity at 19.85% and steel 17.92%. Of these 3 sectors, only electricity saw contraction. While Steel grew 6.72%, and refining at 1.06%; electricity contracted -5.80%. Cement continued to show smart traction in May at 9.23% hinting at a boost to construction. Apart from electricity, the other 3 sectors to see contraction in May 2025 included fertilisers -5.89%, natural gas -3.59%, and crude oil -1.80%. Supply chain challenges continued to put pressure on the hydrocarbons space.

BREAKING DOWN MAY 2025 CORE SECTOR GROWTH

The table captures breakdown of the +0.71% yoy core sector growth for May 2025 across 8 infrastructure baskets. Previous data points have been revised, appropriately.

Months	Overall (%)	Coal (%)	Crude (%)	Natural Gas (%)	Refinery (%)	Fertilizers  (%)	Steel  (%)	Cement (%)	Electricity  (%)
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	5.09	5.29	0.65	-1.76	2.83	1.67	7.31	10.32	6.17
Jan-25	5.08	4.64	-1.14	-1.51	8.31	2.96	4.73	14.30	2.30
Feb-25	3.36	1.65	-5.17	-6.04	0.75	10.24	6.85	10.71	3.63
Mar-25	4.51	1.64	-1.90	-12.74	0.20	8.83	8.69	12.22	7.49
Apr-25	0.99	3.46	-2.75	-0.94	-4.50	-4.16	4.38	6.34	1.75
May-25	0.71	2.76	-1.80	-3.56	1.06	-5.89	6.72	9.23	-5.80

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

Let us look at some of the key performers and pressure points. Oil & fertilizers were hit by supply chain issues, while the power sector struggled to maintain output at par with the rising demand for power. On the upside solid traction in steel and cement can be attributed to a sharp revival in construction demand in recent months. Out of the 8 core sectors, only in the case of steel, cement, and oil extraction; the May 2025 output is better than the average of last 12 months. In all other cases, it is lower.

HIGH FREQUENCY CORE SECTOR GROWTH (MAY 2025)

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

Core Sector Component	Weight	May-25 (YOY) %	May-25 (MOM) %	FY26 Cumulative (%) #
Coal	10.3335	+2.76%	+5.86%	+3.13%
Crude Oil	8.9833	-1.80%	+3.10%	-2.20%
Natural Gas	6.8768	-3.56%	+2.43%	-2.34%
Refinery Products	28.0376	+1.06%	+8.81%	-1.72%
Fertilizers	2.6276	-5.89%	+13.29%	-5.12%
Steel	17.9166	+6.72%	+2.10%	+5.53%
Cement	5.3720	+9.23%	+1.81%	+7.78%
Electricity	19.8530	-5.80%	+0.14%	-2.17%
Core Sector Growth	100.0000	+0.71%	+3.74%	+0.85%

Data Source: DPIIT (# 2-months data)

After the high frequency core sector growth contracted by -11.25% in April, the month of May 2025 saw MOM expansion at 3.74%. What is more interesting is that all the 8 core sector items in the basket showed MOM expansion, which is a positive signal in terms of high frequency data. However, what is rather disappointing is the FY26 core sector expansion of just 0.85%. We have only 2 data points, so there is scope for expansion in the future. Five contracting items in the FY26 basket is not a good sign.

CHARTING LONG TERM STORY OF CORE SECTOR GROWTH

The cumulative core sector growth for 2 months of FY26 stood at a tepid 0.85%. This is sharply lower than the FY25 core sector growth of 4.50%, FY24 core sector growth at 7.61%, FY23 at 7.80%, and FY22 at 10.41%! Even assuming the base effect, the fall has been quite sharp and it underlines the need for private sector to also participate in capex to keep the core sector growth going. Over the last 13 years, the average core sector growth stands at 4.0%; and if the COVID year (FY21) is excluded, the average stands at 4.9%. The FY26 core sector growth at 0.85% leaves a lot to be desired in comparison!