Economic recovery still dicey, key indicators remain dull in Nov


This is only slightly better than October, when five indicators were in green. The performance in September, when seven indicators were in green, remains the best on the tracker since covid-19 was declared a pandemic in March.

Launched in October 2018, Mint’s macro tracker provides a monthly state-of-the-economy report based on trends in 16 high-frequency indicators across four segments: consumer economy, producer economy, external sector, and ease of living.

Two indicators in the consumer economy segment—sales of passenger cars and tractors— remained upbeat even as the festival season wound up. These two were among the first data points to show signs of revival after the lockdown, and have rarely moved out of the green.

Overall vehicle registration numbers are still below year-ago levels, but have shown progress, which is significant because it counts sales to the end consumer. With an 18% year-on-year gap in vehicle registrations, November was the second best month in the pandemic so far, after September, shows data from the Centre’s Vahan dashboard.

The broadband subscriber base and domestic air travel demand were far below their five-year-average trends. But air travel is showing consistent uptick. The number of passengers carried by domestic airlines in November was around half of the year-ago level, the best so far during the pandemic.

The producer economy was also mixed. Core sector output had a minor setback as the year-on-year deficit widened for the first time since April. The contraction rate was 2.5% in October, compared to 0.2% in September. The data for November is not yet available as core sector output figures are released with a lag.

The composite Purchasing Managers’ Index (PMI) exceeded the five-year average for the third straight month. There was a slight dip since October, but the index reading was well over the 50-mark, at 56.3. A PMI reading above 50 shows expansion in activity.

Bank non-food credit grew only 5.6% in October, the slowest in over three years. Rail freight traffic, a proxy for manufacturing activity, was 9% higher than a year ago, the fourth month in a row of growth.

After a one-off hint of turnaround in September, merchandise exports are back in the negative zone, and were 8.7% lower year-on-year in November. Major labour-intensive sectors, such as gems and jewellery, and leather products, fared better though, as their exports were nearly at the same level as a year ago. This is the first time in a year that the indicator is in the green, or above the five-year-average trend.

One other indicator of the external economy segment, import cover, was in green. The Indian rupee, however, depreciated 1.1% against the US dollar in November, the first time it has lost value since June. This was also the first time since April that the currency movement was in the red, or below the five-year-average trend. The currency has been gaining again in December.

The ease of living segment of the macro tracker remains in bleak shape. All four indicators have been in the red since August. Inflation eased a bit since the six-year high of October, but was still elevated at 6.93%. While the Reserve Bank of India has continued with its accommodative stance, members of its monetary policy committee (MPC) flagged inflationary risks in their last meeting in early December. Analysts from ICICI Securities have pegged a 5-5.3% range for retail inflation by the last quarter of 2020-21, but warned of upside risks.

The overall job outlook sentiment is better now than the June quarter, but a net 9% respondents to the RBI’s industrial outlook survey still believe jobs declined in the September-ended quarter. This was 29% in the previous quarter.

Other indicators may have performed better in November, though. For example, the weekly Nomura India Business Resumption Index picked up through the month, and has risen further in December. The index also tracks indicators such as mobility data, which are not part of the macro tracker.

The festival season, which ended in November, helped the economy show signs of revival in patches. One reason the recovery was tentative was the sudden spike in coronavirus cases in some states after Diwali. But with that out of the way, December may well be the first month when the pandemic slowed down without much fear of worsening. This may finally push the recovery needle forward.

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