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Home >News >India >What to watch this week: India’s credit growth, US’ GDP

Every Monday, Mint’s Plain Facts features key data releases to keep an eye on during the week. The Reserve Bank of India (RBI) will release the fortnightly data on credit and deposits of commercial banks. Gross domestic product (GDP), goods trade, and business activity data for the US will be out. And the euro area’s flash composite purchasing managers’ index (PMI) print will also be keenly watched. Here are the big numbers to track:  

 

  1. Credit Growth  

 

The Reserve Bank of India (RBI) will release data on credit and deposits of commercial banks this week for the fortnight ending 13 August. Loan offtake has largely disappointed, reflecting weak demand and uncertain outlook across the economy. Bank credit grew 6.2% in the previous fortnight compared with the year-ago period, on a lower base. Much of the growth came from retail and agri-related activity as the slump in industrial credit continued. This trend is expected to continue, but if signs of industrial credit growth emerge, that will be seen as a positive signal by markets.  

 

With easing restrictions, business activity is inching back to pre-pandemic levels, raising hopes of businesses and consumers regaining their optimism. Yet, analysts expect a significant recovery in credit growth only by the end of this fiscal. 

 

Deposit growth has been increasing at a faster clip than credit growth during the pandemic, and this trend is also expected to persist for a while.  

 

2. US GDP  

 

Thanks to rising consumption expenditure and strong government spending, US real GDP grew at an annual rate of 6.5% in the second quarter of 2021. Easing curbs led to a significant pickup in activity. Still, supply and capacity constraints pulled growth below the Bloomberg consensus estimates of 8.5%. But the two drivers of growth—rising consumption and government spending—remain strong and are expected to continue to power the US economy. A recent note from Fitch suggests corporate investments could add a third leg to the economic revival, as firms build up capacity to address growing demand.  

 

There are two major headwinds that the US economy faces: the fast-spreading Delta variant that has led to a resurgence in covid cases and the waning impact of the government’s massive fiscal stimulus that could slow down growth. The revised estimate for the second quarter due on Thursday, will give a more meaningful glimpse into the sustainability of the US economic boom.  

  

3.  US PMI  

 

The flash reading of the US composite PMI will be released on Monday. Signs of peaking momentum in the economy emerged soon after a record spurt in May. The pace of economic growth slowed for the second straight month with a composite PMI print of 59.9 in July against 63.7 in the previous month. Moderation in the services output after the initial reopening of the economy pulled down the overall index. Now a more balanced growth is visible across both manufacturing and services.  

 

 

But concerns are rising over inflationary pressures and supply constraints, which could cap economic momentum over the coming months. Further, the resurgence of infections has dampened business optimism, pushing it to the lowest levels seen so far this year. Still, the PMI reading has been in expansionary territory, and is expected to remain above the 50 mark.  

  

4. Euro PMI  

 

With easing restrictions in July, Eurozone business activity expanded at its fastest monthly pace in over two decades. Services drove this acceleration as manufacturing output softened during the month. Germany saw the quickest rise among the four largest Eurozone economies, registering a record high expansion. The rapid pace of vaccination and booming consumer demand across major Eurozone economies is fuelling hopes of a rapid economic recovery. The impressive strength of the services sector and sustained elevated growth seen in manufacturing are expected to underpin strong GDP growth in the ongoing quarter. The flash reading of Eurozone composite PMI, due on Monday, will tell us if the economy is indeed progressing at the expected pace.  

 

 

This preliminary reading would reveal if the strong upturn can be sustained, or whether the threat of the Delta variant has dented economic momentum. Investors would watch out for any signals on disruptions in production, which could push up prices.  

 

5.  US Trade  

 

Surging demand for inbound shipments of industrial supplies including petroleum saw the US merchandise trade deficit widen to its second-highest level in June. Imports saw a sequential rise of 1.5% to $237.4 billion, while exports remained flat at 0.2%. As businesses step up their spending and investments, the demand for goods is expected to have climbed further in July. The merchandise trade data due on Friday would tell us how far imports have climbed, and whether or not the trade gap continues to widen.  

 

 

While the Delta variant has emerged as a threat all across the globe, it seems to have impacted the US trade partners more than the US. As a result, it is likely that US exports will continue to remain weak even as imports continue to grow, riding on the back of strong domestic demand, thereby widening the deficit.

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