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31 Jul 2018


Impact: Positive (Consumer Durables), Negative (Core Inflation)

Brief: Consumption drives consumer durables and related sectors to record double digit growth YTD; sectors are expected to grow stronger this financial year. Outlook for inflation may however worsen.

Data suggests that several consumer durables and related sectors have been recording double digit growth in FY19 YTD. In terms of incremental units produced, growth sectors include Computer & Electronics (+27.5%), Motor Vehicles & Trailers (+21.7%), Furniture (+11.5%), Fabricated Metals (+11.4%) along with Transport Equipment (+11%). Since these are manufacturing based sectors, industrial production gave us a sense of the reality. For services, we assessed the top line performance of relevant service based industries. Results are corroborating well with the industrial output. Service sectors that are seen as enabling/ proxies to consumption have recorded solid expansion here as well. As per initial assessment, Real Estate (+~100%), Whole Sale & Trading (+33.3%), Computer Software Industry (Part of ITES) (+16%) and Banking (+13%) are primarily seen growing their topline in Q1 FY19. Even though the margins of such industries may not be as healthy as compared to the previous years, there is a strong evidence of larger wealth creation and hence higher consumption growth.

Since, again, consumption remains our theme, we believe that these numbers suggest incremental demand which is largely driven by positive sentiment; largely from Government expenditure (MSP and deficit financing), healthy Monsoon and rising spending (at the cost of savings). With the currency depreciating though, this could add to India's import bill and spawn inflation fears given an already alarming core inflation print.

Strong Performers in Q1 FY19

ManufacturingService Based
Computer, Electronic and Optical ProductsReal estate
Motor Vehicles, Trailers and Semi-trailersNatural Gas Trading and Distribution
Food ProductsWholesale & Retail trading
FurnitureComputer Software Industry
Fabricated Metal ProductsBanking
Other Transport Equipment