Situation

On a monthly basis

Production ( IIP) dropped by -0.2 % in Mar’07 ( 0.8% in Feb’07) .

On an annual basis 

Production grew by 2.3% p.a in Mar’07 ( 3.0% p.a in Feb’07).

The rate of capacity utilization fell 0.2 % to 81.4 %( was 81.6% in Feb’07). The average capacity utilization between 1972 - 2006 is 81% .

Background

  1. Production had grown at 3.0% in Feb’07 ( restated from 3.4% )
  2. New orders continued its declines in Feb’07 ( effects Mar’07 and Apr’07 production). 
  3. Orders  do not look like it will improve dramatically. i.e may not drop heavily - but rises may not be strong either. ( see: New orders )

Conclusion  (click on image for a bigger visual)

  • Production looks like retaining a range between 2.10% p.a ( initially) towards a top of 4.00% p.a until mid ‘07
  • If slowdown in orders continues ( due to the current inventory ) it would result in production growth down towards the sub 0% towards a -5.00% towards end’07

Recently the fed has talked about a possibility of considering rate increases. This may not be possible unless there is some growth in inventory offtake ( thereby creating a possibility of mismatch  between demand and supply resulting in inflation)

Related Links

  1. USA - Production grows by 3.4 percent per annum in Feb’07 (2.7 percent in Jan’07)
  2. USA - New Orders continues declines in Feb’07 ( annual basis)
  1. Euro area - Production (IIP) grows in Feb’07
  2. India - Production continues to drop in Feb’07 
  3. UK - Production: Sluggish growth in Feb’07
  4. Japan : IIP - Production grows moderately in Feb’07 (on an annual basis)

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