GDP growth for the quarters ending September 2012 and December 2012 will be sub 5% as weak agriculture and slowdown in external demand hamper growth, says Morgan Stanley Research
GDP (gross domestic product) growth for the quarters ending September 2012 and December 2012 will be sub-5% as weak agriculture and slowdown in external demand hamper growth, according to Morgan Stanley. “The poor agriculture growth, weak investment trend, a sluggish DM (developed market) growth outlook and weakness in the service sector are the key reasons affecting our base case outlook for FY13. We maintain our GDP growth forecast for FY13 at 5.1%,” says Morgan Stanley Research.
While IP (industrial production) growth has improved in August, this pickup in IP growth has been largely factored in the GDP growth estimates, says Morgan Stanley. Industrial production growth accelerated to +2.7% y-o-y (year-on-year) in August 2012 from -0.2% y-o-y in July 2012, revised downwards from +0.1% y-o-y stated earlier, reports Morgan Stanley. This was higher than consensus expectation as per Bloomberg survey of a growth of 1% y-o-y and the Morgan Stanley expectation of 1.5-2.5%. On a seasonally adjusted sequential basis, the IP index grew by 2%month-on-month (versus -0.4%m-o-m in July). On a 3-MMA (three months moving average) basis, IP growth remained steady at an average of +0.2% y-o-y during the three-months ended August 2012 compared with the three months ended July 2012.
In the manufacturing segment, output growth accelerated to 2.9% y-o-y, as compared with a fall of 0.4% y-o-y in July. Within manufacturing, industry group publishing, printing and reproduction of recorded media contributed most to the improvement, growing by 15.4% y-o-y followed by radio, TV and communication equipment and apparatus (14.5%), medical precision and optical instruments, watches and clocks (14.4%) and wearing apparel; dressing and dyeing of fur (10.3%). On the other hand, office accounting and computing machinery contributed most to the weakness, declining by -13.1% y-o-y, followed by motor vehicles, trailers and semi-trailers (-9.5%), other transport equipment (-7.6%) and tobacco products (-5.1%). Mining output also improved, growing by 2% y-o-y versus -1.6% y-o-y in July whereas electricity output growth slowed to 1.9% y-o-y compared with 2.8% y-o-y in the previous month, reports Morgan Stanley Research.
Consumer goods output growth rebounded sharply to 5% y-o-y in August versus 0.5% y-o-y in July, reports Morgan Stanley Research. Within consumer goods, consumer durables output improved to 4% y-o-y in August, versus 0.6% y-o-y in July, and consumer non-durables output rebounded to 5.8% y-o-y in August versus 0.3% y-o-y in July.
Capital goods output declined by 1.7% y-o-y in August, as compared with the 4.5% y-o-y decline that we saw in July. Moreover, this improvement has been there despite an unfavourable base effect, as capital goods output grew by 4% in August 2011, as compared with a 13.7% decline in July 2011, reports Morgan Stanley Research. Nonetheless, capital goods output remained a drag on overall IP as IP ex-capital goods grew by 3.4% y-o-y in August versus 0.5% y-o-y in July.
Basic goods output growth accelerated to 2.8% y-o-y in August versus 1% y-o-y in the previous month, and intermediate goods output recovered to 1.9% y-o-y in August versus fall of -1.2% y-o-y in the previous month, adds Morgan Stanley Research.