Brokerage house Nomura said despite the decent industrial output reading for March, there are no clear signs of a recovery.
Read: March IIP at 2.5% as capital goods, manufacturing lead
Following are Nomura’s 5 takeaways from the March IIP numbers:
*We estimate that, on a seasonally adjusted basis, IP contracted by 1.6% m-o-m in March, which indicates that the pickup was largely due to a positive base effect, even as the underlying trend remained weak.
*The demand-side break out continued to reflect the fact that the uptick in industrial production growth was not broad based and was largely due to strong growth in the volatile capital goods category.
*On the supply side, manufacturing sector output growth rose marginally, while mining output contracted for the sixth consecutive month from the clampdown on mining activity.
*Electricity output growth improved in March, but nonetheless remained weak as it continues to be a binding constraint for the industrial sector, in our view.
*We estimate that the underlying trend in IP growth remains at about 2%, which suggests that, although the industrial cycle has bottomed, there are currently no clear signs of a recovery.