Indian Industrial production data, rose by 6.8%yoy in January significantly higher than consensus estimate of 2.0%yoy. The December figure was revised up to 2.5% from 1.8% earlier, resulting in a 4.0% cumulative growth for April-Jan FY11/12 as a whole (vs. 8.3% in the corresponding period of the previous year). The January outturn was mainly led by a sharp recovery in manufacturing sector activity (+8.5%yoy; +5.3%mom), while mining (-2.7%yoy; +0.4%mom) and electricity sector (+3.2%; + 0.9%mom) output growth remained muted. Within manufacturing sector, the strongest growth was recorded in consumer nondurables (+42.1%yoy), led by food products & beverages (+92.6%yoy) segment.
The most encouraging aspect of the data was that IP growth excluding the volatile capital goods component was up 8.1% (6.0% in December). The sharp recovery in the January IP growth ties well with the strong rebound in manufacturing sector PMI during the same month (57.5 in Jan vs. 54.2 in Dec), even though the two indicators have shown divergent trend earlier when compared on a monthly basis. The slowdown in manufacturing sector PMI in February to 56.6, from 57.5 in January however indicates only limited upside to IP.
In a related development car sales in India jumped to a record in February as customers bought more vehicles on concerns that the federal government may raise taxes on diesel vehicles in its budget for the next financial year. Local car sales rose 13% last month, the steepest pace of growth since April 2011, to 211,402 autos from 186,890 autos a year earlier, helped mainly by persistent demand for diesel vehicles, data issued by the Society of Indian Automobile Manufacturers showed. Going forward headwind is expected from high interest rate and tight credit availability.
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