India's production numbers due today

Oct industrial production data is due today and favourable base effects are likely to sharply lift the headline print. Oct IP is expected to rise 6.6% YoY from 3.6% the month before. Besides base effects, higher electricity generation and a bounce in the manufacturing activity are likely to buoy the headline. 

On the use-based end, capital goods output likely extended its firm run after rising 14% YoY in the Sep quarter. Consumer goods production also recovered from the trough as easing inflation and low financing costs support discretionary spending. Durables output hastened 12% YoY in 3Q15 while non-durables slumped 3.4% YoY. Easing inflation has lifted urban real purchasing power, though rural demand is weighed by cutback in fiscal support and subdued wage growth, hindering a stronger rebound in the consumption-sensitive industries. 

In the meantime, a revival in the domestic industrial cycle has been offset by a downcast external sector. Exports contracted by an average 18% in Apr-Oct15, outpacing the 15% fall in imports. At the same time, a rising inventory vs sales ratio also points to some moderation in the production cycle. In sum, the cyclical improvement in factory output continues to gather pace, with full-year growth likely to average 4-5% YoY this year from 2.8% in FY15.