InvestorQ : How were the IIP numbers for July 2022 and what pushed it so low?
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How were the IIP numbers for July 2022 and what pushed it so low?

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Juvina Maggie answered.
2 weeks ago
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Industrial output is still growing, but not as fast as expected. For the latest reported month of July 2022, the industrial production (IIP) growth hit a 4-month low of 2.4%. This 2.4% IIP growth in July 2022 is in sharp contrast to 12.7% growth reported in June 2022. To some extent, it is normalization of the base effect, but the high frequency pressure is still there. Export demand has slowed as global economies like the US, UK and Europe are facing the possibility of a slowdown. Also, China’s stringent anti-COVID measures and disruption of trade routes are affecting supply chains. In addition, the unseasonal heavy downpour in select regions also contributed to pulling down the pull down the IIP in July 2022 to 2.45%.

To get a more high frequency picture, let us also look at IIP on a sequential month-on-month basis. In July, the sequential IIP actually contracted by -0.75%. That is rather paradoxical. On the one hand, the manufacturing PMI at 56.4 hints at expansion in output while IIP is showing pressure on high frequency output. The slowdown has now impacted key export sectors like textiles, petroleum products, machinery and equipment. Apart from the supply chain constraints, even the monetary tightening has been a factor in most cases.

To sum it up, there has been a perceptible slowdown across the board. For instance, in the month of July 2022, manufacturing growth slowed to 3.2%, electricity output also slowed to just about 2.4% while the mining output shrank -3.3% in July. This is the first mining contraction in the last 16 months. The heavy rains in specific mineral rich areas spoilt the show in July. The expectation, or the hope for now, is that IIP growth should grow in the range of 4% to 6% in August 2022. That is likely to be hopefully better than July.

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