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Overview of key macroeconomic indicators, updated monthly.


Inflation

Globally, inflation has been inching up in 2022 across Wholesale and Consumer indices. This has prompted central banks to hike interest rates in India and US. Consumer Price Index (CPI) growth has dipped a little while the Wholesale Price Index (WPI) growth has dipped considerably as of August 2022.

The world is monitoring inflation data to gauge where interest rates are headed, and how that will impact the markets. And we are watching interest rates to understand how the equity markets will play out. Interesting times indeed!


Interest Rates

After a long cycle of declining or stagnant interest rates, thanks to inflation, the interest rates have started to move upwards. Its impact is being observed in equity and debt markets. We’re officially in a rising interest rate cycle with two steep rate hikes by RBI in quick succession. The third Repo rate hike came in August 2022 which took the repo rate to 5.4.

Elsewhere, central banks across the world are either mulling or have raised interest rates recently.


Trade – Exports & Imports

Imports are at high levels at $61.9 Bn while the exports have not caught up ($33.9 Bn).  This has resulted in a huge trade deficit which is steadily growing and currently stands at ~$ 28Bn.


Passenger Car & 2W Sales

The number of passenger cars sold per month in August 2022 is still quite lower than what it has been in the recent past. But, the pre-owned car market is booming as per media reports. Moreover, car dealerships are asking customers to patiently wait for their cars to be delivered. This ties nicely with the conclusion that this fall in new car sales is due to global supply shortages, especially semiconductors. So demand may not be as low as these numbers indicate.

Two-wheelers serve as a key indicator of the income levels of the middle class. Two-wheelers are utilitarian (mode of transport) and lifestyle upgrade status symbols as well. So 2W is always on the top of the purchase list which means – an increase in disposable incomes induces sales. 2W sales have been picking up nicely since Jan 2022 which is a strong indicator of increasing income levels.


Fuel Consumption

Monthly consumption of petrol & diesel near its pre-covid peak as well. The consumption is back to pre-covid levels even when the prices of petrol and diesel are much higher.


Credit Growth

As they say, “cash is oxygen”. Credit growth is a primary indicator of the health of Small & Medium Enterprises. The credit growth of commercial bank loans stands at 15.3% which is much lower than what it was in 2012. So potentially, a decade of lower credit growth in the economy.

We are seeing a sharp uptick in credit growth in 2022. The steep increase in this growth rate is due to the lower base value of 2021 – the time when 2nd wave of covid hit the country.

According to us, credit growth has been struggling for mainly two reasons 1) Higher lending rates offered by the banks (decreases demand), 2) Lack of interest (or trust) on banks’ part to lend to businesses (low supply), and 3) Decreased avenue of cash deployment by small & mid-size businesses i.e. lower economic activity.


GST Collection

GST (or Indirect tax) collection just dropped off from an all-time high. A higher GST indicates higher economic activity and a thriving GDP but other economic indicators suggest otherwise. The current GST collections are higher than what the government estimated earlier which may help in funding welfare schemes.


FPI Flows (USD)

Foreign Institutional Investors (FIIs) have been net sellers since Oct 2021 which has clearly been reflected in the markets. This has been a global trend and increases in interest rates by FED have triggered an increase in outflows. It will be interesting to see when this money (or liquidity), that left our markets, comes back.


Airline Passenger Kms Flown

India was gradually embracing air travel as the industry had a lot of factors going in its favor – low crude prices, push for domestic tourism, reduced airfares vs increased train fares, and a growing middle class.

Post covid, the air travel demand has been subdued due to pandemic-related issues and growing crude prices have not helped either. The sector is seeing limping growth as things get normal in this post covid world.


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