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May-24 IIP received manufacturing boost to 5.91%
Industry News- Jul 15,24
The trends in mining, manufacturing, and electricity have fluctuated over the past few months.
The Index of Industrial Production (IIP) growth surged to 5.91% in May 2024, despite the uncertainties surrounding the election period. This significant rise is noteworthy considering the base IIP growth between April 2023 and May 2023 increased from 4.61% to 5.66%. The manufacturing sector contributed a substantial 100 basis points to this growth, highlighting its crucial role in the IIP basket.
IIP data is reported with a one-month lag, so May's figures are released in mid-July. The month saw improvements in manufacturing and electricity output, while mining output declined. Given manufacturing's 77.63% weight in the IIP basket, its performance heavily influences the overall IIP. Typically, IIP numbers undergo two revisions after one and three months. In May, there were no revisions to the previous month's figures.
The reported IIP growth is usually year-over-year (YoY), which captures long-term trends but misses short-term momentum. Month-over-month (MoM) growth in IIP provides better insights into short-term changes. For May 2024, high-frequency growth across mining, manufacturing, and electricity was positive, reflecting short-term momentum. Mining IIP rose by 4.28%, manufacturing by 3.81%, and electricity by 8.16%, resulting in an overall MoM IIP increase of 4.40%. This positive trend reversed the negative high-frequency growth seen in the previous month.
The trends in mining, manufacturing, and electricity have fluctuated over the past few months. In January 2024, manufacturing growth was tepid, while mining and electricity showed strong growth. February saw all three sectors improve sharply. However, in March, manufacturing and electricity grew robustly while mining declined. In April, manufacturing faltered, but in May, manufacturing and electricity showed higher growth, while mining IIP growth slightly declined.
For May 2024, YoY mining IIP growth was 6.6%, down from 6.8% in April. Electricity IIP rose to 13.7% from 10.2% in April. Manufacturing IIP growth increased to 4.6% from 3.9% in April. Consequently, the overall IIP for May 2024 at 5.91% was higher than April's figure, with manufacturing being the key driver.
Despite the base IIP between April 2023 and May 2023 increasing, YoY IIP growth in May 2024 was 5.91%, nearly 93 basis points higher. There were no revisions to the data for May, a usual occurrence. The election-related manufacturing slowdown seems to have been overcome in May 2024.
The latest IIP data shows two positive trends: the diminishing impact of the Red Sea crisis and trade disruptions, and the revival of rural demand. Export-driven manufacturing sectors like furniture and electronics have shown rapid growth, indicating resilience in global demand. The resurgence in rural demand, highlighted by recent CRISIL data, adds to the positive outlook.
The IIP growth of 5.91% in May 2024, higher than April's 5.0%, is on a higher base and yet indicates a positive impact. Manufacturing growth increased by 70 basis points to 4.6%, significantly contributing to the overall IIP boost. Several export-driven sectors, such as apparel, electronics, and furniture, showed strong growth, suggesting an end to the export slowdown experienced over the last year and a half. Products like food, printing, and textiles saw declines, but manufacturing and electricity showed strength while mining tapered slightly.
FY25 has just two months of data (April and May), so cumulative trends are still developing. The cumulative IIP growth for FY25 at 5.4% is lower than FY24's 6.0% but aligns with FY23's 5.5%. FY22's low base makes comparisons less relevant. More data in the coming months, along with monsoon and agricultural insights, will provide clearer trends. FY25's IIP growth seems promising with election uncertainties behind and export-driven sectors showing good traction. However, leather products remain under pressure due to
(Source: IIFL Securities)
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