Monthly Macro Dashboard of Indian Economy by IIFL Securities

26 Mar 2024 , 03:16 PM

Dec/Jan HFI data shows – 1) Industrial data (coal, steel, and cement output) shows weakness in Dec but electricity & port cargo traffic show signs of recovery in Jan 2) Strong trends in rural employment as unemployment rate fell to 5.8% and YoY fall in MNREGA demand in past 3 months 3) Central govt. capex zooms after lagging in past couple of months, while revex still remains slow 4) Surprisingly high inflation in US and EU and strong economic data in US have surged global yields back to Nov’23 levels – 4.3% in US and 2.4% in Euro 5) Despite higher global yields, Indian yields have remained lower at around 7.10% due to favourable demand-supply outlook. 

• Industrial activity remains weak in Dec, PMIs expand – Steel production growth in Dec has been the slowest in the past 14 months at just 5.9%YoY. Coal production growth has moderated down to around 10.5% in the last couple of months. Cement production growth saw a recovery at 1.3% after contracting 4% in Nov. Electricity consumption growth recovered to 6.1%YoY in Jan after slowing down to 1.6% in Dec. IIP grew by a meagre 3.8% in Dec. However, PMIs in both Mfg. & Services further expanded at 57 & 62 respectively in Jan.
• Port freight traffic sees recovery – Railway freight traffic in Jan stayed constant at 6.4% YoY growth. Port cargo traffic recovered slightly to grow at 3.3%YoY in Jan v/s 0.7% in Dec. Port container traffic contracted 4.3%YoY in Jan vs 0.7% growth in Dec.
• Consumption trends mixed – Retail PV sales grew 12.9% YoY vs 2.1% in Dec, while 2Ws grew 14.9% YoY vs 27.5% in Dec. Air traffic further slowed to 4.6% YoY in Jan from 8.3% in Dec. Fuel consumption grew by a robust 8.3%YoY in Jan vs 2.6% in Dec, primarily driven by jump in petrol consumption. GST collections growth in Jan remained constant at ~10.5% YoY. CMIE consumer sentiment fell marginally to 104.4 in Jan vs 106.7 in Dec with substantial decline in rural sentiment.
• Rural employment trends getting stronger, but fall in consumer sentiment – Wholesale tractor volumes contracted by another 15% whereas retail tractor volumes saw a robust growth at 22% in Jan. Fertilizer consumption contracted the most in 9 months at 9% in Jan (v/s -3% in Dec). MNREGA demand contracted for third consecutive month, at -7.7%YoY in Jan agreeing with rural unemployment falling to 5.8%. Agri credit continues to grow at a robust 19.5% YoY in Dec. Rural consumer sentiment fell to 105.8 vs 109.1 in Dec, but is still strong.
• FII/ FDI outflows in Jan, Fx reserves remains high – Dec saw net FDI withdrawals of $3.9bn vs +2.9bn in Nov. This has been the first net withdrawal in the past 4 months. FDI has been weak YTD – only $9.7bn in FY24 vs $21.6bn in FY23. Dec saw strong ECB flows of $5.1bn, taking YTD inflows to $36bn vs $20bn in FY23. FPI also withdrew $3bn in Jan, after infusing $7bn in Dec. MF inflows came in at $2.8bn in Jan. FX reserves are at a comfortable $617bn.
• Central govt. capex zooms, revenue expenditure still slow – CG capex jumped sharply by 105.4%YoY in Dec after two slow months (+1.6/-15% in Nov/Dec). 9m YTD capex growth stands at 37%YoY. But since budget FY24 says 28% full year, implied Q4 growth is 12%. However, revenue expenditure continues its slow run in the last four months (-4/-14/-16/-6% in Sept/Oct/Nov/Dec). 9m YTD revex growth stands at a meagre 2%YoY.
• Trade deficit improves to $17.5bn– Trade deficit for Jan improved to $17.5bn vs $20bn in Dec. Overall exports and imports grew by 3.1% and 3% YoY respectively. Core exports showed a growth of 2.5% while core imports contracted by 2% YoY. Services surplus continues to expand slightly on a MoM basis, coming in at $16.8bn in Jan’24, primarily driven by rising exports.