This One Economic Indicator Continued To Fall In May
Traffic at major ports contracted 23.3% year-on-year in May compared with 21.1% decline in April.
Most economic indicators saw a revival in May after falling to record lows in April. From electricity and fuel consumption to mobility and digital payments, data has suggested that April was the bottom, with early recovery seen in May.
One indicator, however, hit a new low in May, pointing to continued disruption in cross-border transactions. Traffic handled at major Indian ports continued to fall last month, showed latest data available from the Indian Ports Association.
Traffic at major ports contracted 23.3% year-on-year in May compared with 21.1% decline in April.
Even on a month-on-month basis, traffic was lower, although the drop wasn’t as pronounced as in April
Traffic contracted 4.3% month-on-month in May 2020 after having fallen by 23.3% in April. Major ports handled 4.54 crore tonnes of traffic in May, down from 4.74 crore tonnes of traffic in the preceding month.
The deepening contraction in traffic at major ports is seen across most categories.
Thermal coal saw the deepest contraction across major categories, contracting 43.7% in May against 30.5% seen in April. Iron ore shipments, however, rose 37.8% after having contracted 11.3% in April. Raw fertilisers shipments, too, saw growth in May but at a slower pace than in April.
The lag in port activity is because of a mix of demand- and supply-side issues, said Sameer Narang, chief economist at Bank of Baroda. Supply-side disruptions caused by lockdowns across different parts of the world and paucity of labour have disrupted activity at ports, he said.
Global trade, however, is expected to pickup. As such, volumes at major ports could also start to rise soon, he said. That said, imports are likely to continue to lag because of lower demand, he said.
India’s merchandise exports amounted to $10.36 billion in April compared to $26.07 billion in the year-ago period, contracting 60.28%. Sequentially, exports halved, contracting 51.6% in the span of just a month. Merchandise imports were at $17.12 billion in April, 58.65% lower than the $41.40 billion reported in the year-ago period. Between March and April, imports fell 45.05%. Data for May is awaited.
Most Other Indicators Improve
Though still weak, most other logistics indicators have shown slow but steady improvement in economic activity.
- Rail freight contracted 21.28% in May after a contraction of 35.3% in April.
- From 10-15% at the time of the peak lockdown, demand for trucks was up at about 30% in May.
- Consumption of petroleum products also improved. While diesel consumption contracted 29.4% in May from 55.6% in April, petrol consumption contracted 35.4% in May after shrinking 60.4% in April.
A similar pickup has been seen across other high frequency indicators like electricity generation, e-way bill collections and mobility trends.
“We believe the worst of the severe contraction in supply and demand, which was witnessed during April-May, is over. However, this is based on the premise that we will not encounter a formidable second wave of Covid-19 and that the monetary and fiscal policy support provided by the central banks, governments and supranational entities will continue,” Vivek Kumar, senior economist at Yes Bank, said in a note.