As the economic data for the month of August streams in, what are the lead indicators saying about the pace of growth and how sustainable is the current pace of growth?
The economy clearly appears to have lost some of its mojo in August compared to July.
Power generation and e-way bills are the bright spots but everything else -- exports, core imports, rail freight, auto sales and above all employment have fallen from July levels.
Exports have been the engine of growth – the best firing engine. Unfortunately, August is off from July levels probably because of the virus spreading in other countries and therefore there is a demand slowdown. Compared to August 2020, it has risen over 50 percent and compared to August 2019 – pre-COVID-19 year – it is still showing annual growth of 13 percent. So good indications are from there.
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Non-gold imports reflect industrial health. The core imports have fallen off from July levels. This is entirely dependent on domestic demand. It is better than August of 2020 which was a lockdown month. Compared to pre-COVID-19 August, it is annually growing at a very tepid pace of 3 percent.
Rail freight in August was lower than July. So again, showing lower economic activity, it could be because of the rains as well. However, it is much higher than August 2020 and continuing to keep the pace over August 2019, it is showing annual growth of 10 percent.
A positive story because August is better than July, it is sharply rising over August 2020 and August 2019. It shows a 6 percent annual growth.
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In August, the numbers are just as well as July, 2.07 million bills a day and it is a rising story so even over August 2020 and August 2019, it has been doing well.
Auto sales numbers are a big lead indicator. Bajaj Auto is the only company which has shown a rise in August over July but that is because they have a lot of exports, their domestic sales did not do better than July. However, compared to August 2020 and August 2018, it is still a lackluster story.
It is much worse for Hero MotoCorp. It has not done as well as June and July, compared to August 2020 and August 2018, demand also is not picking up.
It is not any different for Maruti Suzuki as well. August is worse than July, it has been plagued by demand and supply issues. The numbers are almost as bad as August 2020 and compared to August 2018, it is carrying a lot of unutilized capacity.
The worst message of August comes from the job numbers. CMIE calculates that unemployment went up by 1.3 percent while employment – fewer jobs were generated – fell from July to August from 37.4 to 37.2 percent.
Watch the accompanying video of CNBC-TV18’s Latha Venkatesh for a detailed analysis.