The purchasing managers’ indices (PMI) for India will be released this week. The central banks of the US and the UK will announce their monetary policy decisions. Q2 earnings are due from Tata Motors and Dabur India
Every Monday, Mint’s Plain Facts section features five key data releases and events to watch out for in the coming week. The monthly purchasing managers’ indices (PMI) for India will be released this week and will give clues on the business activity recovery in October. Monetary policy decisions are due from the UK and the US. Tata Motors and Dabur India are set to announce their earnings for the September-ended quarter. Here are the five numbers to track:
India’s manufacturing and services PMI numbers for October will be released on Monday and Wednesday. Businesses are pinning their hopes on festivals and pent-up demand, but will stay nervous about the sustainability of this recovery. The pace of growth since the second wave has been tentative. The manufacturing index saw a sharp rebound in July, but saw some weakness in August before growth picked up again in September.
The September expansion was driven by businesses scaling up production and recording a substantial increase in intake of new work, with some contribution from international markets. An increase in retail mobility also lifted services activity, while employment returned to growth territory for the first time since the pandemic began. However, some drag factors are likely to remain. Persistently high input costs may not bode well for producers, who could soon be forced to start passing them on to consumers, a Centrum report said.
2. Tata Motors Earnings
Tata Motors will release its September-quarter financial results on Monday. The auto sector has been severely hit by global supply chain disruptions of late, with the passenger vehicle (PV) volumes of Tata Motors declining nearly 8% month-on-month in September. This could drive the company’s consolidated net sales down by more than 10% sequentially, after already declining 25% in the June quarter, analysts said.
The shortage of semiconductor supplies has constrained Jaguar Land Rover production as well and analysts expect the segment to report weak volumes.
However, the gradual recovery in the commercial vehicles space and early initiatives in the electric vehicles (EV) segment could help avoid bumps in the road to recovery. The company has outlined an aggressive stance for its EV business with $2-billion investment planned over the next five years. Analysts at Prabhudas Lilladher said the PV business was set to gain market share, riding on its SUV-focused approach and new product pipeline.
3. US Fed Meet
The US Federal Open Market Committee will announce its monetary policy decision on Wednesday. Since the last meeting, covid-19 cases have subsided and economic activity has improved, while inflation remained at a sky-high level of 5.4% in September.
US Federal Reserve Chair Jerome Powell had said after the last meeting that the withdrawal of emergency pandemic support could start as soon as November, with an end likely by mid-2022. Analysts are pricing in a cutdown in asset purchases by $10 billion to $15 billion a month. While the Fed seems to have given adequate signals on policy normalization, emerging markets including India may still need to adjust to global investors repositioning their portfolios.
Elevated inflation has forced several economies to raise interest rates and a beginning of policy normalization by the Fed could nudge more to follow suit.
4. UK Policy
The Bank of England (BoE) will announce its seventh monetary policy decision for the year on Thursday. Analysts expect a hike in the interest rates as the UK continues to battle inflationary risks.
Retail inflation marginally eased to 3.1% year-on-year (y-o-y) in September from a nine-year high of 3.2% the previous month. However, it remains significantly above the 2% target. No respite is likely any time soon as the economic recovery pushes demand up, even as supply-chain bottlenecks refuse to ease and energy prices remain on an upsurge.
Huw Pill, BoE’s chief economist, had last month said inflation could rise “close to or even slightly above" 5% early next year. BoE has already slowed down bond purchases, and could soon join the list of countries that have hiked rates. There’s one drag, though. The decision may hinge upon the risks emerging from the new Delta Plus variant detected in the country.
5. Dabur Earnings
Dabur India, a leading fast-moving consumer goods (FMCG) company, is set to announce its financial results for the September quarter on Tuesday. Analysts expect the company to continue reporting a decent revenue growth (around 9-12%) driven by robust volumes and aggressive product launches.
Raw material prices will likely lead to a contraction in margins, as for the rest of the FMCG sector. Price hikes so far will not be enough, but analysts believe more calibrated hikes in the coming months will help Dabur protect its margins.
In the year-ago period, the company had benefited significantly from increased demand for health and immunity products during the first wave of the pandemic. That demand is likely to experience a y-o-y slowdown because of the high base. However, the company will find support from its entry into additional product categories such as edible oil and household insecticides, said an ICICIdirect report.
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