Economic Indicators Show Recovery Continues But Momentum Weakens In July
Having rebounded in June, high-frequency indicators continued to pick up in July but at a weaker pace.
The Nomura India Business Resumption Index, a weekly tracker of the pace of economic activity normalisation, fell to 95.3 for the seven days ended July 25, after a high of 96.4 in the preceding week, according to a note. It remains 4.7 percentage points below the pre-pandemic levels.
The index comprises mobility, power demand and labour force participation rates.
QuantEco’s proprietary index also declined for the first time in 10 weeks. The gauge slipped 2.5% for the week ended July 25 compared with an expansion of 1.7% in the week prior, according to its note. The index retreated to 97.7 after having surpassed the pre-pandemic level of 100 in the week prior, at 100.2.
Notwithstanding last week’s loss of momentum, July has seen a measured recovery in economic activity to near pre-pandemic level, which was marginally overshot in February this year. Economic activity can be expected to continue to trend sideways in the coming weeks.QuantEco Research
Electricity Demand, Mobility On Slippery Ground
While demand for electricity continued to grow month-on-month, it showed signs of weakening, contracting for two straight weeks after mid-July.
Average demand for electricity met during evening peak hours rose 6.7% in July, according per data up to July 28. That compared with a rise of 8.3% in June. But it contracted 4.8% for the week ended July 25 on a weekly basis, following a decline 2.1% in the prior seven-day period.
Mobility to places of retail and recreation, and work showed a dip in the last 10 days of the month. Mobility indices registered the first week-on-week fall since mid-May, with Google’s workplace, and retail and recreation mobility down 0.4 percentage points and 0.6 percentage points, respectively, Nomura said.
Data for E-way bills generated suggests that collections for the full month will likely remain flat over June and well below the peak of March.
E-way bills generated fell to 4.96 crore for the month as of July 25, compared to 5.47 crore in entire June.
Labour markets showed signs of improvement. Demand for work under the government’s flagship employment-guarantee scheme eased from the previous month though it still remained very high.
3.2 crore households demanded work under the Mahatma Gandhi National Rural Employment Scheme in July compared with 3.5 crore in June.
Unemployment rate, as measured by CMIE, rose to 7.1% for the week ended July 25 from 6% in the preceding seven days. But this isn’t too bad, Mahesh Vyas, managing director at CMIE, said in a research note on the company's portal. Labour participation rate jumped to over 41%, and most of the increased LPR was absorbed into employment, he said. "The simultaneous increase in the LPR and the employment rate is what makes July promising."
Labour participation rate is still 2.7 percentage points below than pre-Covid level, while the employment rate remains 3.3 percentage points lower.