CareEdge Economic Meter:
CareEdge Economic Meter (CEM) continued on the downward trajectory in June for the third straight month. The Decline Continues in June
score eased to 5.4 after ending the previous financial on a high of 7.6. The moderation in the score, in part, reflects the cooling down of pent-up demand following the Covid-19 third wave. Additionally, the economy is currently dealing with inflationary challenges which have particularly impacted the manufacturing sector. Consumption has been slow to recover amid growing inflationary expectations. Financial sector volatility amid growing interest rates, capital outflows and weakening of domestic currency are some other challenges impacting the pace of economic recovery. As a result, six out of fourteen high-frequency indicators used in CEM score calculation contracted sequentially causing the score to decline.
GST collections and E-way bill registrations were robust in June gaining from improving economic activities. GST collections crossed the Rs 1.4 trillion mark for the fourth month in a row and were second-highest ever in June. Power consumption, reflective of overall economic activity, grew by 16.2% (y-o-y) in June on account of higher commercial and industrial demand. Vehicle registrations, an indicator of discretionary consumer spending, saw a mixed trend with the registration of passenger vehicles (light and medium) rising sequentially but that of two wheelers declining sequentially.
Encouragingly, the services sector activity in June jumped with PMI-services rising to a record high of 59.2. However, manufacturing continued to struggle due to an unrelenting rise in input prices. PMI-Manufacturing fell to a nine-month low of 53.9 in June.
In another sign of consumer activity, bank credit expanded by 13.2% (y-o-y) during the fortnight ended June 17. However, capital markets exhibited volatility during the month amid growing economic uncertainties. While the fundraising by corporates through debt issuances improved in June compared with a year ago, equity issuances registered a steep decline. Rising interest rates globally and the fear of a global growth slowdown could have weighed on equity markets.
The merchandise exports in June slowed compared with the previous month owing to global uncertainties while imports rose marginally. Imports remained above USD 60 billion for the fourth straight month due to elevated commodity prices.
The unemployment rate in June climbed to 7.8% in June primarily due to the rural unemployment rate, which has jumped sharply to 8.0% from 6.6% in May. The urban unemployment fell to 7.3% from 8.2% a month ago. With progress in rainfall and improved Kharif sowing in July, the demand for agricultural labourers is expected to rise. This would bode well for rural employment and in turn for rural consumption demand. Urban employment is expected to gain from the rising economic activities.
Overall, various high-frequency indicators have been exhibiting a mixed trend so far in FY23. While indicators such as GST, E-way bill registrations, credit growth and PMI services have been performing well, others continue to lag. As a result, the economic recovery has remained uneven. Challenges on account of geopolitical risks and inflation continue to hamper the growth momentum. Consumption demand is improving, albeit at a slower than desired pace. Improving capacity utilisation levels is setting the ground for a pick-up in private investment. However, economic and financial volatility could weigh on investors’ sentiment. High raw material prices continue to be a pain point for the manufacturing sector. There are some signs of easing commodity prices. However, it is difficult to say if the trend will continue amid a volatile economic environment. Slowing global GDP growth could also have a bearing on the economy. Hence, the economic outlook for the current fiscal remains quite uncertain and will ride completely on the wheels of private consumption and investment demand.
CEM tracks the state of the economy based on 14 high-frequency indicators. Each of these reflects a particular aspect of the economic activity in areas such as production, consumption, investment and employment. The changes are tracked and compared over the preceding periods both in terms of a single month and cumulatively.
How to Interpret the Meter?
| Score (0-10) | Interpretation |
| <4 | Stagnation |
| 4-6 | Recovery |
| 6-8 | Steady-state |
| >8 | Acceleration |
