IIP dips to 3.1% in May on slowdown

July 12, 2019 11:39 pm | Updated 11:41 pm IST - New Delhi

Growth in industrial activity slowed in May to 3.1% driven by an across-the-board deceleration, especially in the consumer durables sector, according to official data released on Friday.

Retail inflation in June quickened marginally to 3.18% due to a rise in food price inflation, a separate release showed.

Growth in the Index of Industrial Production slowed in May from 4.32% in April. Within the index, the mining sector slowed to 3.16% in May from 5.07% in April. The manufacturing sector saw growth slowing to 2.46% from 3.98% over the same period.

Driven by increased demand during the summer months, the electricity sector saw growth accelerating in May., one of the only sectors to do so, to 7.41% from 5.99% in the previous month.

“The fact that IIP has come down and that the effect is rather pronounced in the case of durable goods is indicative of the continuing slowdown in the first quarter of the fiscal year,” DK Srivastava, Chief Policy Advisor at EY India said. “High frequency data shows there is a continuing slowdown in demand, so IIP will be subdued for a few more months.”

The consumer durables sector contracted 0.7% in May compared with a growth of 2.17% in April. The overall consumer goods sector, however, was buoyed by stronger growth in the consumer non-durables sector, which registered 7.72% growth in May compared with 5.87% in the previous month.

The capital goods sector saw growth slowing to 0.75% in May from 1.23% in the previous month. The infrastructure and construction sector also saw growth slow significantly, to 5.54% from 7.21% over the same period.

Retail inflation, as measured by the Consumer Price Index, accelerated somewhat in June to 3.18% from 3.05% in May.

The CPI trend of marginally going up is because it follows the movement of food prices with a lag,” Mr Srivastava explained. “In the previous months, food prices had gone up and even though they are now falling, that rise is only now registering in CPI. The important thing is that core inflation is stable so there doesn’t seem to be any real inflationary pressures.”

Inflation in the food and beverages category quickened to 2.37% in June from 2.03% in May. The pan, tobacco and other intoxicants category saw inflation accelerating to 4.11% from 3.93% over the same period.

Inflation in the clothing and footwear segment eased to 1.52% in June from 1.82% in the previous month. The fuel and light segment saw inflation slowing to 2.32% in June from 2.48% in May.

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