DANCING NUMBERS

GOOD SHOW: The June IIP numbers have far surpassed market expectations (Pic: Bloomberg)

Talk about surprises. The index of industrial production (IIP) numbers for June that came out on Wednesday were way above market consensus estimates of about 4 per cent growth; they came in at 7.8 per cent over June 2008.

A significant contributor was mining, but that is a seasonal factor: coal mining, among others, picks up ahead of the monsoon. Consumer goods also grew by about 4 per cent. But the biggest surprise was in the growth numbers for capital goods, which grew at an astounding 11.8 per cent — which translates into over 14 per cent month-on-month — after having contracted steadily month-on-month since February this year.

Some of that could be from automobile spares and other goods for the transportation sector, but not enough to justify the 11 per cent jump.

The surprising thing is that there seems to be nothing that explains this performance; very little has changed in the last months to suggest a large uptick in industrial activity or industrial investment. Many analysts have gone ahead and raised gross domestic product growth estimates, and that might be a little misleading.

A bleak monsoon is already throwing some doubts about the 6 per cent growth estimate that most have forecast. The swine flu pandemic scare is another factor that could impact current estimates downwards. The IIP growth could offset those adverse effects, but that’s all. The IIP numbers for July could well fall back to the 3-4 per cent range.

For many, that could be another surprise albeit an unpleasant one.