All eyes are on the gross domestic product (GDP) numbers for the September quarter, out on Wednesday. The Bloomberg median estimate is for 6.8%, but the range is wide, from 6.5% to 7.5%, down from 7.7% in the June quarter. But growth below 7% will deepen the doom and gloom. Economists have been busy revising their growth estimates down, and a lower than 7% growth in the September quarter will reinforce the pessimism.
Could the corporate financial data for the September quarter provide clues? The chart shows the year-on-year growth in revenues of non-financial companies included in the Nifty. While growth has slowed, it’s still quite high at 22%. If we assume inflation at around 10%, that’s real growth of 12%. So the company data suggests a more optimistic picture. In fact, revenue growth seems to have done better in the September quarter compared with the year-ago period. A review of September quarter results of the Sensex companies by Motilal Oswal Financial Services Ltd also shows that revenue growth was 22% compared with the year-ago period.
Indeed, corporate revenue growth has been better than expected in the September quarter, according to a report by Morgan Stanley Research that says revenue growth during the quarter beat estimates by 9%. This positive surprise in revenues was high among the region’s markets, with MSCI Asia ex-Japan beating revenue estimates by 4% during the quarter.
The problem is there doesn’t seem to be a close correlation between nominal GDP growth and corporate revenue growth. As the chart shows, corporate revenue growth was very high during the June quarter (the first quarter of fiscal 2012, or Q1 of FY12), yet nominal GDP growth at factor cost dropped.
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What have been the macro trends? The Purchasing Managers’ Index survey data shows that both manufacturing and services growth stalled during the last quarter. But GDP growth during Q2 of FY11 was lower than growth during Q1; so growth during Q2 of FY12 will receive a boost from the base effect.
The Q1 FY12 numbers showed a deceleration in the growth of private final consumption expenditure (PFCE). Year-on-year growth in PFCE was 8.9% in Q2 of FY11, 8.6% in Q3, 8% in Q4 and then a low 6.3% in the Q1 of FY12.
On the other hand, gross fixed capital formation went up by 7.9% in Q1 of FY12, well above its 0.4% growth during the previous quarter. Data from companies, however, tells that consumption growth is strong, but investment demand is faltering. Wednesday’s numbers will tell us whether that’s true at the macro level.
Graphic by Yogesh Kumar/Mint
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