Slowdown ahead?1 min read . Updated: 12 Sep 2007, 11:03 PM IST
The industrial production numbers for July released on Wednesday are far lower than expected. At 7%, their growth rate is the second lowest in 18 months. The June numbers, too, have been revised downwards.
Should we worry?
It is clear that the recent slowdown in consumer demand continues. Durables have been the worst hit. The most obvious cause for this, and one that economists point to, is that higher rates of interest and the slowdown in bank credit have forced consumers to buy less. So, the sluggish 5.3% growth in production of consumer goods was expected.
What is more surprising is the slowdown in production of capital goods—which is an indicator of investment activity. Though capital goods output is still growing in double digits, it is far lower than the level reached in recent months.
It is premature to say that the investment boom is winding down. Most other indicators of investment are still running strong.