Indian Economy Monthly Macro Dashboard by IIFL Capital Services

24 Jul 2023 , 11:45 AM

Highlights: 1) Vehicle sales see sharp slowdown – both PVs and 2Ws register mere ~2% YoY growth. 2) Rural continues to remain weak – muted tractor volumes, weak fertiliser consumption & high MNREGA job demand. 3) Freight movement saw a slowdown in June as both railway freight and port container traffic saw contraction on YoY basis 4) Current commodity prices reflect a slight surge from their lows in May’23 (crude up 11%), global wheat prices surge by 22% vs May lows as Russia exits Black Sea grain deal.

• May’23 IIP growth accelerated to 5.2% YoY vs 4.5% YoY in April. Pickup in mining (6.4% YoY) and manufacturing (5.7% YoY) boosted the IIP growth to a 3 month high. Sectorally, the growth was driven by infra (14%) and cap goods (8.2%). Coal/Steel production continue to be reasonably strong 7.2%/9.2% on YoY basis in May, while cement production saw a robust by 15.5% YoY growth. Bitumen consumption also saw a pickup in June (8.2% YoY vs. 0.8% in May).
• Freight movement saw a slowdown in June as railway freight traffic contracted by 1.9% YoY. Port cargo traffic also saw a meagre 0.4% YoY growth (slowest since March 2022). Port container traffic saw a contraction of 6.5% YoY in June.
• PV sales growth moderated sharply to 2% YoY in June (vs 13.5% in May), and is expected to remain muted for this quarter. 2W sales also grew at a meagre 1.7% YoY in June. Domestic air passenger traffic growth at 19% YoY in June picked up from last month. Fuel consumption growth slowed to 4.3% YoY in June vs 9% in May.
• For Rural (especially Agri) – Tractor volumes saw a 4.2% YoY growth in June vs 1.2% in May. Fertiliser consumption continues to see a muted growth of 1.7% YoY in June. Overall unemployment increased to 8.5% in June (vs 7.7% in May). Urban unemployment improved to 7.9% (vs 9.1% in May) while rural jumped from 7% in May to 8.7% in June. MNREGA demand increased to 44mn in June (highest in over a year). Agri credit growth holds steady though, coming in at 16% YoY in May. Progress of south-west monsoon is currently near normal after a delayed start. However, we need to be watchful of spatial distribution as well as intensity as some regions have witnessed significantly above normal rainfall while some regions still show significant deficit.
• M3 grew by 13.4% YoY in June (highest growth in last 5 years) and CD ratio came in at 75.1. Deposits growth picked up pace, accelerating to 15.5% YoY, while credit growth stayed strong at 16.1% YoY. Sectorally, industry credit growth continues to grow at slowest pace of 6% YoY. Other sectors continue to see buoyant credit growth of ~20% YoY.
• Surveys continue to indicate strong activity levels – Mfg PMI came in at 57.8 in June (vs 58.7 in May). Services PMI also came down from May levels of 61.2 to 58.5 in June, but continues to remain firmly in expansion zone. CMIE consumer sentiment continue to improve steadily – currently at 96.6, at its highest since the beginning of the pandemic. Both urban and rural sentiments improve to 95.3 and 97.3.
• June’23 trade deficit came in at $20bn, slightly lower than $22bn in May. Overall exports declined 22% YoY while imports declined 18%. Core exports declined by 11% YoY (7th straight month of decline). Services balance continued to be healthy at $11.2bn. FX Reserves picked up from May, coming in at US$ 595bn in June.
• India inflation rose to 4.8% YoY in June’23 vs 4.3% in May mainly due to spike in food prices as was widely expected. Core CPI remained sticky at 5.1% YoY. US & Euro CPI fell to 3% & 5.5% respectively. US retail sales continue to grow at a meagre 1.5% YoY in June (0.2% MoM), remaining negative in real terms. US money supply has now seen contraction for 8 months in a row (-3.1% YoY in June).
• Current commodity prices reflect a slight surge from their lows in May’23. Oil is at $80/bbl vs May closing of $72bbl, LME at 3,765 vs 3600 while CRB food index at 566 vs 530 levels. Wheat prices have surged from $594/bu to $723/bu due to collapse of the Black Sea grain deal. Russia’s exit from the grain deal could now potentially threaten to increase global food insecurity and risks adding to global food inflation.