The PMI reading for India’s manufacturing sector and its core sector output data will be released this week. Data on capex announcements during the September quarter is also due
Every Monday, Mint’s Plain Facts section features five key data releases to keep an eye on during the week. India’s core sector output data for August and the crucial purchasing managers’ index (PMI) for the manufacturing sector for September will be out this week. Investors will also keep a close eye on the capital expenditure figures for the September-ended quarter. The euro area’s latest inflation estimates and updated GDP figures for the US and the UK will also be released this week. Here are the big numbers to track:
The SeptemberPMI reading for India’s manufacturing sector is due on Friday. The sector had continued to expand in August but had lost momentum somewhat, with the PMI falling to 52.3 from 55.3 in July. Rising input price pressures and weakness in demand were to blame. Input prices were elevated due to the scarcity of raw materials and logistical bottlenecks, but producers only partly passed them on to consumers. The demand was subdued due to uncertainty around growth prospects and a potential third wave. Employment was stagnant as firms were operating with sufficient workforce.
The economic gains have continued in September, with an uptick in key high-frequency indicators such as mobility and labour participation. The Nomura business resumption index has reported a slight dip but stays above pre-pandemic levels. The PMI reading will further tell whether the manufacturing sector managed to grow out of stagnancy in September.
2. Core Output
India will release data on core sector output in August on Thursday. The index, released by the ministry of commerce and industry, measures the performance of eight core industries: coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity. The data is available with a month’s lag.
In July, the combined output of these sectors rose by 9.4% over the depressed base of the same month last year. The sectors in the index showed divergent trends: while cement, natural gas and coal sectors grew by 18-22%, crude oil reported a decline, and fertilizers output was stagnant. All sectors regained the July 2019 levels, except crude oil and refiner products.
In August, the manufacturing sector recorded a slight slowdown in momentum as measured by the PMI, but the overall business outlook was brighter. This could help the core sector report growth in August.
3. Capex Growth
Capital expenditure plans got a severe blow last year when the nationwide lockdown sapped investors’ confidence. The second covid-19 wave was far less disastrous. Projects worth ₹2.7 trillion were announced in the first quarter, 29% higher sequentially and the highest since the pandemic began. A growing number of analysts see India entering a capex growth cycle, though the pick-up may not be broad-based yet .
The September-quarter figures will be released on Friday. A further surge would spell better days ahead, while any weakness would mean the sentiment is still tentative. Business mood has improved since June, and low lending rates keep investors enthused. However, uncertainties have not gone yet, and companies may like to keep some powder dry for now.
An economic rebound led by consumer spending lifted US GDP by a sequential 6.6% in the June-ended quarter. The UK, too, basking under easing covid-19 rules, reported a 4.8% growth. Both countries will issue updates to these estimates on Thursday.
There are multiple challenges to this growth. Even as the US prepares to open up for travellers, a covid-19 spike is a major risk. Jobs are not picking up, and raw material shortages and supply chain issues are choking businesses. Consumer confidence in the US dropped to a six-month low in August, while the UK grew slower than expected, at 0.1%, in July.
The Organization for Economic Co-operation and Development (OECD) has pared its 2021 growth forecast significantly—the US’ to 6% and the UK’s to 6.7%, partly due to the Delta variant risk. Sustaining growth and averting a slowdown is becoming a challenge.
5. Euro area inflation
High inflation in 2021 was not unexpected, but for the euro area, the price rise may have paced up far too much for comfort. In August, the headline print soared to a decade high of 3%, from 2.2% in July. The provisional data for September is due on Friday.
Spiralling natural gas and electricity prices and supply bottlenecks are keeping the pressure up. Policymakers have so far kept a benign view on prices, but may now start to get worried as inflation has stayed above the European Central Bank’s (ECB) mid-point target of 2% for two straight months. ECB’s President Christine Lagarde expects inflation to rise further but hopes it will ease next year.
In the longer run, Europe’s green transition is also likely to put the heat on inflation. Temperature changes and more frequent adverse weather events, rising carbon prices and higher production costs could have an upward impact on retail inflation, said a Danske Bank report dated 16 September.
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