Intelligentguess

Situation

New orders for manufactured goods in January’07 , contracted by ( - 1.56 % ) p.a . The last time the New Orders were in a negative was between April and September 2003. 

The drop was a (- 5.6 %) as compared to December’06. (December’06 had grown by 2.6 % as compared to November’06)

Conclusion ( click/double click on chart for the bigger picture )

New Orders - growth rate looks like it could initially range between a negative ( - 3.00 %) p.a  & a possibility of a 4.00% growth p.a for the first half of the year. Post this - the index could contract towards a (-5.00 %) p.a by the later half of the year. ( and could remain there for the early half of 2008)

The current contraction in New Orders - and the possibility of it remaining in a contracted mode for the next few months -  has a strong negative impact on the Index of Industrial Production (IIP).

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( this report was initially made on Feb 18th - BUT now has updates reflecting the impact of New Orders for January 2007)  

Situation 

IIP grew by 2.6% p.a in January 2007. This is the lowest growth rate since October 2005 ( 2.54%  p.a)

IIP decreased 0.5 percent in January after an increase of 0.5 percent in December. Output in the manufacturing sector declined 0.7 percent in January; about one-half of the decrease was a result of a drop of 6 percent in motor vehicles and  parts.

The output of utilities rebounded 2.3 percent, as temperatures moved back toward seasonal norms, while the output of mines moved down 1.2 percent.

The rate of capacity utilization in January fell 0.6 percentage point, to 81.2 percent. Even so, it was 0.1 percentage point above its year-earlier level and 0.2 percentage point above its 1972-2006 average

Conclusion (click / double click chart for the bigger picture)

The New Orders Index for Manufactured goods has been dropping at an alarming rate in the past few months. This will have an strong negative impact on the IIP .

While IIP could range between - a drop to a 0% p.a growth rate and a 3.00% growth p.a for the immediate months (reflecting the higher new orders until October-November 2006)  - it will  contract towards a negative zone towards the middle of 2007 - and could contract further to a negative ( - 5%) p.a by early 2008.

It does look like 2007 - 2008  will see a very low growth rate - towards a contracting rate, for the IIP.

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