1 Sep 2016

Agricultural looks good

The Nikkei Purchasing Manages’ Index numbers for July showed improvement. The Manufacturing number was 51.8, up slightly on June and the Services number was 51.9, up from 50.3 in June. Core sector growth was 5.8% in June, up from 2.8% the previous month. In June the Index of Industrial Production increased by 2.1%, the best number since December 2015. Inflation numbers confirmed the concerns at the RBI: CPI rose to 6.1% in July, up from 5.8% in June. WPI maintained its advance out of deflationary territory, rising to 3.6% in July after 1.6% in June. The dominant contributor was food prices. The monsoon settled back in August, such that rainfall in the season so far is equal to the Long Period Average. Precipitation in September is expected to be no more than normal, so the final outcome will be lower than optimistic forecasts but normal nonetheless. The final outcome is largely irrelevant however, as the geographic and temporal distributions have enabled bumper cropping, ensuring an excellent kharif harvest. Prospects for the second, Rabi crop, which is dominated by wheat, will depend on water table replenishment, which has been good and reservoir levels which are recovering.

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