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Overview of key macroeconomic indicators, updated monthly.


Inflation

Globally. inflation has been inching up in 2022 across the Wholesale and Consumer Index. This has triggered interest rate hikes in India and US. Consumer Price Index (CPI) has dipped a little while the Wholesale Price Index (WPI) continues to rise. The world is watching inflation data to determine the money supply through interest rates. And we are watching interest rates to understand how the equity markets will play out.


Interest Rates

After a long cycle of decrease or stagnant interest rates, thanks to inflation, the interest rates have started to move upwards. Its impact of it 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 US is also not holding back in increasing interest rates.


Trade – Exports & Imports

Imports are at their highest ever levels at $63.2 Bn while the exports have not caught up. This has resulted in a huge trade deficit which is growing with each passing month.


Passenger Car & 2W Sales

The number of passenger cars sold per month in May 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 quoting months of wait time for new car deliveries. This ties nicely with the conclusion that this fall in new car sales is due to the global supply shortages, especially semiconductors. So demand may not be as low as these numbers indicate.

Two-wheelers serve as a key indicator of income levels of the middle class. Two-wheelers are utilitarian (mode of transport) and a status symbol as well. So they are always on the top of the purchase list and an increase in disposable incomes induces sales. Interestingly, two-wheeler sales have been struggling. This fall in sales can be attributed to 1) an increase in prices by OEMs and 2) an increase in fuel costs and 3) loan wait times in popular models.


Fuel Consumption

Monthly consumption of petrol consumption is at its highest and has crossed its pre-covid peak as well. The increase in prices has not deterred the use of this essential commodity. However, the usage of diesel also crossed the pre-covid peak in March 2022 but has retracted a little since then.


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 13.1% which is much lower than what it was in 2012. It is still better than the multi-year lows it hit last year. 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.

Decaying credit growth can be attributed to mainly two reasons 1) Higher lending rates offered by the banks (low demand), 2) Lack of interest on banks’ part to lend to businesses (low supply) and 3) Decreased avenue of cash deployment by small & mid-size businesses.


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 has estimated earlier which may help in funding welfare schemes.


FPI Flows (USD)

Foreign Institutional Investors (FIIs) have been net sellers in the recent past which has clearly been reflected in the markets. This has been a global trend and increases in interest rates by FED has 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 some limping growth as things get normal in this post covid world.


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