‘Recovery signals are mixed since August’

Clouded outlook: High-frequency indicators in August were ‘decidedly uneven’, says ICRA’s Aditi Nayar.  

Signalling a softening in the momentum of the economic recovery, eight of 15 high-frequency indicators weakened in August, with diesel consumption, domestic passenger traffic and vehicle registrations falling below pre-COVID levels, ratings agency ICRA said on Monday.

While the August numbers indicated that the recovery after the second COVID-19 wave has been patchy, the early data for September also remained mixed, the agency said in a note on the state of the economy.

It appears that the temporary fillip to economic activity — after State-wise restrictions to cope with the second wave were eased — has petered out, said ICRA chief economist Aditi Nayar, emphasising that the high-frequency indicators in August were ‘decidedly uneven’, especially when compared to the pre-Covid levels. The performance of 13 non-financial indicators in August was mixed compared with July, as well as with pre-Covid levels.

“Particularly, after a sharp recovery since June, the daily average generation of GST e-way bills rose only mildly to 2.13 million in August from 2.07 million in July 2021,” the note said, attributing this to a stabilisation in dispatches rather than a signal that the industrial growth momentum was plateauing.

The daily average generation of GST e-way bills so far in September has been similar to August levels, but ICRA expects it to pick up in October as pre-festive season stocking comes into play. Ms. Nayar said she was ‘cautiously optimistic that rising confidence will amplify festive demand’ even though early trends for September are ‘unconvincing’.

On the positive side, non-oil merchandise exports, Coal India’s output, rail freight, electricity generation and petrol consumption recorded an encouraging expansion in August, relative to August 2019. Passenger vehicles’ production and ports’ cargo traffic were flattish over the last month, ICRA said.

“Looking ahead, with a gradual improvement in the economic situation, the waning impact of high healthcare costs related to the second wave and the improvement in the coverage of vaccines, confidence levels should improve,” Ms. Nayar noted, adding this should lead to a ‘perceptible improvement’ in October.

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Printable version | Oct 27, 2021 3:50:30 AM |

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