Feb. industrial production holds up despite power cuts, forex troubles 

The industrial production in February has endured the troubles in the macro-economy, which caused authorities to impose daily power cuts from around the mid part of the month, although the index reflects the brewing challenges underlying the sector.  

According to the Industrial Production Index (IIP) released this week by the Department of Census and Statistics, the index reported 101.4 index points for the month February, up 2.3 percent from a year ago. 

The changes in the index measured on a monthly basis have gained only 0.2 percent to 103.8 index points from 103.6 index points in January in an early reflection of the decelerating industrial activity in the country before things started to further slowdown in the face of longer daily power cuts, forex troubles and shortages in key commodities.
The IIP reflects the manufacturing firepower and provides a proxy for the economy. 

Among few of the key sub-categories in the index, food, which typically shows resilience, declined both annually and monthly while the beverages did pretty well in the two periods. 

While the textiles expanded, the manufacturing of wearing apparels contracted compared to a year ago and a month ago levels ahead of the seasonal demand that kicked in from the following month. 

But the Purchasing Managers’ Index (PMI) for March showed that garment manufacturers had ramped up their production but the staff issues have prevailed amid disruptions from power cuts. Unlike the PMI, which is released in less than three weeks since the end of the month, IIP is a far lagging indicator, which typically takes more than 45 days to be published. 

Meanwhile, the manufacturing of coke and refined petroleum products expanded while the rubber and plastic products manufacturing followed suit. 

The industrial sector, sans the export-oriented ones could confront a prolonged slowdown starting from April as the manufacturing conditions are getting tightened with the rising borrowing costs, absence of liquidity and decline in demand with the sharp increase in inflation. 

The current monetary and fiscal policies are also aimed at achieving some form of a slowdown in production although it is yet to be seen if that is the remedy for the current economic malaise.