PremiumEconomy watchers are waiting for India’s official GDP data for the June-ended quarter this week. The monthly purchasing managers’ index for August is also due, and so is an account of the central government’s spending and revenues for July.
Every Monday, Mint’s Plain Facts section features key data releases to keep an eye on during the coming week. Right on top of the agenda is India’s gross domestic product (GDP) data for the June-ended quarter. The purchasing managers’ indices (PMI) for August are also due, and will serve as the latest report card for Indian businesses’ recovery progress. Elsewhere, the PMI data for the euro area and China will also be watched. Here are the big numbers to track:
1. India GDP
India’s official economic output data for the June-ended quarter is due on Tuesday. A devastating second covid-19 wave during the period halted the recovery India had made since the 2020 lockdown. Yet, headline growth figures won’t reflect that shock, given the ultra-low base. The sequential contraction figure could provide a more reliable picture.
Enthused by strong corporate earnings, analysts foresee around 18-20% year-on-year GDP growth. However, the high indirect tax collections over the past year make gross value added (GVA) a more preferred metric. An SBI Ecowrap report has pegged GVA growth at 15%.
Output is likely to be driven by industry, in particular construction and manufacturing, owing to healthy capital expenditure, said analysts at ICRA Ltd. Robust exports and resilient farm demand will also boost GDP, while the struggling services sector could weigh down output.
The economy is not out of the woods yet, but high-frequency indicators show swift progress since June. High inflation and a stressed labour market remain a challenge as recovery resumes.
2. India fiscal numbers
The Controller General of Accounts (CGA) will release the central government’s spending and revenues data as of July on Tuesday. A high tax mop-up helped the Centre raise nearly 28% of its budgeted full-year receipts by the June quarter itself. This kept the fiscal deficit in check despite the second wave—so much so that the deficit (18% of budgeted) was the narrowest for this period in 11 years. Collections are likely to stay high, though the annual growth rate could tone down as the base effect wanes.
Economists will also eye the spending figures. Total expenditure till June was almost flat since a year ago, but the capital component rose 26%. The reopening of the economy is likely to keep capital spending robust, signalling a strong recovery ahead, analysts said.
The Centre’s account books have averted a repeat of last year, thanks to greater consumer spending, trade recovery, and excise collections. Can they carry on and come out of the second wave unscathed?
3. India PMI
The latest PMI figures for India are due this week: manufacturing on Wednesday and services on Friday. Both sectors had divergent trajectories in July, with the struggling services sector dragging down the composite score. But some uptick is finally seen in August: earlier this month, a business resumption index run by Nomura exceeded its pre-pandemic baseline for the first time.
A sharp rise in public mobility is likely to have lifted demand for services. Factory output is likely to have continued its gains, too, on the back of new orders and rising output. However, challenges remain, and the various PMI sub-indices will reveal the true story. For instance, in July, the employment sub-index for manufacturing showed its first rise since the pandemic began, but high input costs are acting as a hurdle. The 12-month business outlook will also be watched: services firms were pessimistic about the coming year in July, and their fresh response will show how quick the recovery is to be expected.
4. China PMI
After a strong run since mid-2020, China’s economic recovery is slowing down. Most high-frequency indicators for July failed to meet economists’ estimates, marking a sharp deterioration since June. The purchasing managers’ indices (PMI) for August, a survey-based measure of business activity, are due on Tuesday and will give an early glimpse of the progress made this month.
In July, the manufacturing PMI had seen the slowest expansion in 17 months. Both major factors behind this—unexpected floods and the worst covid-19 outbreak since early 2020—have eased. But new ones are emerging: export demand from the West, a key driver of growth so far, has peaked, and the government’s crackdown on pollution and property markets are weighing on industrial production, Bloomberg reported.
Meanwhile, high input costs continue to choke most businesses’ margins, and are unlikely to ease soon. With dark clouds still around, analysts do not expect the data release on Tuesday to reflect much improvement in business sentiment.
5. Eurozone manufacturing PMI
The August PMI data is due from the euro area as well this week. Early estimates show that manufacturing activity in the 19-member bloc recorded a PMI of 61.5 this month, a remarkable pace of expansion but the slowest in six months. The final data will be available on Wednesday.
The slowdown shows that the rapid recovery of the last few months may have peaked for manufacturing businesses, even as the hard-hit services sector continues to work its way up from rock bottom.
To be sure, with booming demand and improving vaccinations, new order inflows for manufacturers are still at their highest in two decades. But the concerns over the Delta variant have dented the sentiment. Moreover, factory supply is not yet enough to meet the high demand, raising firms’ input cost pressures. The flash estimate for August found that supply constraints also led to slower production growth.
The final number will provide an update based on more survey responses by businesses.
