Animal Spirits Stir-Economic Indicators Hint at Slow Recovery for India

Business Standard Animal spirits stir: Economic indicators hint at slow recovery for India

Any rebound will be slow though, with economists in a Bloomberg survey predicting a milder contraction of 5.3% in the quarter to September.

Business activity in India picked up slightly in July as a gradual improvement in services and exports showed the economy possibly moved past its worst-showing in the previous quarter.

Five of the eight high-frequency indicators compiled by Bloomberg News gained last month, while two were unchanged and one deteriorated. That helped move the needle on a dial measuring so-called animal spirits to the right after remaining stuck at a lower speed for two months.

The pickup in the gauge, which uses the three-month weighted average to smooth out volatility in the single-month readings, holds out hope for a gradual recovery in the economy. The world’s biggest lockdown to contain the coronavirus pandemic brought activity to a virtual halt last quarter, with data due Aug. 31. likely to show gross domestic product declined 19.2% from a year ago.

Any rebound will be slow though, with economists in a Bloomberg survey predicting a milder contraction of 5.3% in the quarter to September.

Business Activity Services activity recorded a marginal improvement in July with the main index for the sector standing at 34.2. While a reading under 50 indicates contraction in activity, last month’s index was better than June’s 33.7 and continues the recovery from the record low of 5.4 in April.

Manufacturing also continued to contract, with the purchasing managers index dipping to 46.0 from 47.2 in June, as domestic orders and output took a hit. As a result, the Markit India Composite PMI for July slipped to 37.2 from 37.8 a month earlier.