IIP Data Fails To Meet Street Estimates

The Index of Industrial production (IIP) data for the month of August 2014 has grown at 0.4% which is lower than 0.5% recorded for the month of July 2014 and lowest in last five months. IIP data for the month of August also failed to meet the street estimate which was expecting a growth of 2.5%. 

The decline in the IIP data was due to the contraction in manufacturing sector which constitutes 75% of the index and declined by 8.3%. Consumer goods dropped by 6.9% whereas Consumer non-durable segment also declined by 0.9% in the month of August.

However, in terms of industries 11 out of 22 industries from manufacturing have shown positive growth in the month of August. The basic metal, which has weightage of 11.35% has shown the highest positive growth of 19.1%, followed by 14.3% in other transport equipment having weightage of 1.83%.

The weak IIP numbers is likely to have a negative impact on the market as it failed to meet the street expectation. This lower than expected IIP number puts pressure on RBI to act on rate front to boost the growth. Nonetheless, WPI and CPI number that are expected in next week will give much clarity on when we can expect the rate cut from the central bank.