Economy: Monthly macro dashboard

21 Dec 2023 , 11:44 AM

Oct/Nov HFI data shows: 1) Industrial data (coal, steel, cement output & IIP) look strong in Oct, but show signs of deceleration in Nov (electricity, bitumen). 2) Consumption trends Oct + Nov data (shift in festive period from Oct last year to Nov this year) show mixed trends though Nov standalone indicates pickup. 3) Net FDI rose after many sluggish months. 4) International indicators remain weak; crude & commodities have seen only marginal uptick despite the indication of a significant US monetary easing (and immediate fall in yields globally) underscoring sluggish global demand. 

· Industrial activity strong: The momentum in coal/steel production continued with 18/11%YoY growth in Oct. Cement production shows a strong pickup in Oct with 17%YoY vs 4.6% in Sep. Electricity consumption growth slowed to 6%YoY; bitumen consumption declined 24%YoY in Nov after double-digit growth in recent months. Railway freight traffic showed a pickup to 8.5% YoY growth in Oct. Port cargo traffic continues to show a strong growth of 18%YoY in Nov vs 13% in Oct. Port container traffic has slowed to 7%YoY in Nov vs 19% in Oct. PMIs — both Mfg. & Services — remains in a strong expansion zone at 56 & 57 respectively, though Service PMI has seen some moderation from the recent peak of 62 in July. 

· Consumption trends mixed: Oct + Nov retail vehicle sales grew 8%YoY for PVs & 5% for 2Ws. Air traffic slowed to 9% YoY in Nov (vs 11/18%% YoY in Sep/Oct). Oct + Nov GST collections were strong at 14% YoY. CMIE consumer sentiment rose to 103.4 in Nov (almost near the pre-Covid levels of 105-106) with advances in urban as well as rural. 

· Rural (especially Agri) weak, but rural sentiment buoyant: Despite the weak rural trends, rural sentiment at 105.3 remains puzzling. Wholesale & Retail tractor volumes declined by 1/9% in Oct + Nov. Fertiliser volumes declined 5.5% in Nov. After being strong in the last few months, MNREGA declined by 7%YoY in Nov; but rural unemployment remains elevated to 9.1%. Agri credit continues to grow at a robust 17.5% YoY in Oct. 

· FDI picks up in Nov, FPI inflows resume – Net FDI into India picked up in Oct at $6bn vs a cumulative of $4.5bn during Apr-Sep. FDI has been weak YTD – only $10bn in FY24 vs $21bn in FY23. ECB flows for Oct were only $0.7bn, but strong YTD $30bn vs $12bn in FY23. FPI equity inflows resumed in Nov with $2.3bn inflows after two months of outflows, and MF inflows remained steady at $2.2bn. FX reserves are back to $600bn, after dipping to $580bn in October. 

· Trade deficit narrows after recent pickup – Trade deficit for Nov narrowed to a normalised $20bn run-rate in Nov, post a jump to $30bn in Oct; partly led by spike in oil & gold imports. Both exports and imports (core as well as overall) declined YoY in Nov. Services surplus continues to expand, coming in at $15.3bn in Nov vs 11.5bn last year. 

· Fall in global yields – US 10yr has fallen below 4% from around 5% a couple of months back. This is because Fed’s dot plots indicate three rate cuts in CY24 – markets are signaling six cuts of 25bps, indicating pressure on the Fed to prop up the economy but the S&P500 grinds higher daily. EU yields are down to 2% vs around 3%, while Indian 10yr yields are below 7.2% vs 7.3%. DXY has weakened to 103 vs 108 levels. 

· International indicators wobbly – M2/M3 growth in US/EU is running negative, while for China at 10% YoY. Inflation in US/EU is easing at a gradual pace and down to 3.1/2.4% YoY respectively. Both exports and imports have been declining since many months for US, EU and China (China exports/imports were flat in Nov). Consumer confidence is struggling to pick up as PMI for USA and China remains near the baseline of 50; while for EU is in contraction zone since the last few months. 

· Demand weakness seen in Commodities – Brent is currently trading around $80/bbl, despite rate-cut signals from Fed, multiple supply cuts and new geo-political tensions in the Middle East. Other commodities — metals & food — have firmed a bit, but there is no major movement. LME metals remains near the 3,700 level, while CRB Food Index is down to 470 vs 520 levels in November.