IIP June likely to be weak – SBI says

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The yearly SBI Composite Index for July 2015 declined sharply to 49.7 from 53.2 for June 2015.

The number implies a low decline in manufacturing activity, compared to a ‘moderate growth’ for the same month last year.

Looking purely at the monthly index, activity decline to 47.0 (Low Decline) in June 2015 from 46.7 (Low Decline) in July 2015.

A reading above 50 implies growth over previous respective period and less than 50 suggests a contraction over respective period.

“Going forward, IIP numbers for June may continue to be even weaker as the Yearly SBI Composite Index for June 2015 had witnessed a decline,” SBI said in a statement.

“The declining momentum in credit growth is likely to have started impacting and this is leading to decreasing momentum in IIP growth. ASCB Bank Credit growth on a year on year basis has continued to decline and reached 9.8% (26 Jun’15), compared to last year growth of 12.8%.”

On the positive side, July’15 SBI index may signal that the deceleration in manufacturing momentum may be bottoming out.

“Government push on Infra, Defense and Renewable Power seems to be the three pillar of future growth in the Banking sector. The Indian road sector has drawn renewed interest in the wake of policy thrust by the new Government. Sectors like Textile- PFY (Polyester Filament Yarn), Wood and Wood product and Auto Components has started picking up in FY15 and outlook is positive for such sectors,” SBI said.

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