Economy: Monthly macro dashboard

26 Oct 2023 , 10:28 AM

Aug/Sep HFI data shows: 1) Continued strong momentum in the Industrial/Infra activity trends, but soft consumption and weak rural (especially Agri) demand. 2) Weak FDI but strong ECB flows and FII outflow after six consecutive months of the net inflow. 3) Dip in FX reserves partly due to the valuation effect, led by a surge in US bond yields; and also because of the RBI selling after six months of being a net buyer of the dollar. 4) Fiscal position turning favourable and a very strong capex by the Centre as well as states. 5) Weak international indicators and the prices of commodities are a reflection of the same. 

• Industrial/ Infra activity trends continue to be strong in Aug/Sep – Coal/Steel/Cement production continue to clock a healthy 17.9%/10.9%/18.9% YoY in Aug. Electricity/Bitumen consumption was strong at 10.3%/ 45.3% YoY in Sep. Aug IIP growth jumped to 10.3% YoY on the back of a softer base, but beat expectations.
• Freight traffic mixed – While the railway freight traffic clocked a steady 6.7% YoY growth in Sep, port cargo traffic grew only 3.3%; though container traffic grew 13.5%.
• Soft consumption trends, but air traffic strong – Growth in PV volumes (wholesale) decelerated to 2.7% YoY in Sep vs 9.7% in Aug, while flattish growth in 2Ws continues. However, at 18.4% YoY, air traffic continued its scorching pace in Sep. Fuel consumption growth accelerated for the 2 nd consecutive month – at 7.6% in Sep vs 6.5% in Aug. Growth in GST collections has been moderating gradually – at 10% YoY in Sep.
• Weakness remains in rural (especially Agri) – Tractor volumes declined 14.7% in Sep — YTD fall of 4%. Fertiliser volumes up only 2.7% in Aug — flat YTD. MNREGA demand sees a seasonal fall, but is still up 10% YoY in Sep. Agri credit continues to grow at a solid 16.6% YoY in Aug.
• Surveys remain buoyant – CMIE consumer sentiment rose to 99.1 in Sep, with advances in urban & rural. PMIs — both Mfg. & Services — remain in a strong expansion zone, at 57.5 & 61 respectively.
• FDI dries up but strong ECB flows, FPI outflow in Sep – Net FDI into India has been weak YTD – only $3bn in FY24 vs $18bn in FY23. However, ECB flows have picked up – YTD $26.3bn vs $8.3bn in FY23. FPI equity flows turned negative (-$2.3bn) in Sep, after six consecutive months of inflows. FX reserves fell below $590bn, after crossing $600bn in July. RBI sold dollars worth of $4bn in Aug, after six months of net purchase.
• Fiscal comfortably placed, capex front-loaded – CG finances look comfortable with YTD growth of 17% in gross tax revenues vs 10% budgeted. The revenues of 18 major state governments are up 9%. Both CG & SG are firing on capex, with 48% & 44% YoY growth.
• International indicators wobbly – M2/M3 growth in US/ EU is running negative, while for China at 10% YoY. Inflation in US/ EU easing gradually, but is still high vs the target. China fears slipping into deflation with CPI close to zero. Yuan should stay weak and keep the INR soft as well. Since the past many months, the exports & imports have been declining for US/ EU as well as in India and China. Yields in US have come off after a major spike. Consumer confidence struggling to pick up.
• Demand weakness seen in commodities – After a brief surge above $95/bbl, Brent has cooled again below $90/bbl; despite multiple supply cuts and new geopolitical tensions in the Middle East. Other commodities i.e. metals & food have hardly budged. In fact, LME metals is down to 3585 currently vs 3700 levels in Sep; while CRB food is little changed at 540. Growth fears seem to have resurfaced.