When we look at industrial production data, the conclusion isn’t always straightforward. Different ways of looking at the data can tell very different stories. In this article, we’ll explore how industrial production looks when comparing year-on-year (YoY) changes and month-on-month (MoM) changes. Don’t worry if these terms sound unfamiliar—we’ll explain everything in simple terms.
Year-on-Year (YoY): The Positive Picture
The year-on-year (YoY) comparison means we compare the industrial production in November 2024 to the same month in 2023. It helps us understand how things have changed over a full year, removing the impact of seasonal events like festivals.
The numbers show good growth:
Year-on-Year (YoY): The Positive Picture
The table below shows the industrial production data for October and November 2024:
| Month | IIP | Mining & quarrying | Manufacturing | Electricity | Primary goods | Capital goods | Intermediate goods | Infrastructure/ construction goods | Consumer durables | Consumer non-durables |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct-24 | 3.7 | 0.9 | 4.4 | 2.0 | 2.5 | 3.1 | 4.6 | 4.8 | 5.7 | 2.6 |
| Nov-24 | 5.2 | 1.9 | 5.8 | 4.4 | 2.7 | 9.0 | 5.0 | 10.0 | 13.2 | 0.6 |
- Manufacturing: Production grew by 5.8 percent, which is a healthy sign for industries making goods like cars, appliances, and machinery.
- Capital Goods: These are goods used to make other goods, like machines and tools. Their production went up by 9 percent, showing that businesses are investing in expansion.
- Infrastructure Goods: Materials used for construction (like cement and steel) rose by 10 percent, pointing to growth in infrastructure projects.
- Consumer Durables: Items like TVs, refrigerators, and washing machines saw an impressive 13.2 percent increase, showing strong demand from people buying these products.
This data suggests that industries are doing well, investments are increasing, and people are spending more on durable goods.
Month-on-Month (MoM): The Negative Picture
The month-on-month (MoM) comparison is different. Here, we compare November 2024 with the previous month, October 2024. This gives us a shorter-term view, but it can be affected by seasonal patterns like festival shopping.
| Month | IIP | Mining & quarrying | Manufacturing | Electricity | Primary goods | Capital goods | Intermediate goods | Infrastructure/ construction goods | Consumer durables | Consumer non-durables |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct-24 | 2.4 | 15.0 | 0.9 | 0.4 | 6.0 | -6.2 | 3.1 | 3.4 | -2.3 | 0.3 |
| Nov-24 | -1.2 | 4.1 | -0.6 | -11.4 | -1.4 | -2.4 | -3.6 | -2.1 | -7.3 | 8.2 |
- Manufacturing: Declined by 0.6 percent compared to October.
- Capital Goods: Dropped by 2.4 percent, suggesting businesses produced fewer tools and machines in November.
- Consumer Durables: Slumped by 7.3 percent, possibly because festival demand had already been met in October.
- Consumer Staples: Everyday essentials like food and personal care products rose by 8.2 percent, showing stable demand for necessities.
This decline could make it seem like industrial activity is slowing down, but that’s not the full story.
Why the Data is Confusing
At this time of year, industrial production is heavily influenced by festivals. Before festivals, companies ramp up production to meet higher demand for goods like consumer durables. After the festivals, production slows down because people have already made their big purchases.
For example, if Diwali happens in October, factories might increase production in September and October to stock up on goods. By November, production naturally falls, making the month-on-month numbers look weaker.
A Smarter Way to Look at the Data
Instead of looking at just one month, we can average the data over three months—September, October, and November. This helps smooth out the ups and downs caused by festivals.
- Three-Month Average Growth (YoY):
- Industrial Production: Grew by 3.9 percent.
- Manufacturing: Grew by 4.7 percent.
This average shows a steady improvement, avoiding the misleading swings in the month-on-month data.
What’s Missing?
To make the data more reliable, we need something called seasonal adjustment. This process removes the effects of predictable patterns like festivals and gives us a clearer picture of what’s really happening. Unfortunately, the National Statistics Office (NSO) does not provide seasonally adjusted IIP data.
Even with seasonal adjustments, there might still be debates about the methods used, but it would at least reduce the confusion caused by seasonal variations.
The Final Takeaway
- Year-on-Year (YoY) Data: Shows long-term growth trends and gives hope that industrial production is recovering.
- Month-on-Month (MoM) Data: Reflects short-term changes, which can be misleading due to festivals and other temporary factors.
- Three-Month Average: A better way to understand the data, as it smooths out seasonal effects.
- Seasonal Adjustments: Crucial for accurate insights, but not yet available from official sources.
While November’s industrial production data offers reasons for optimism, it also highlights the importance of looking beyond raw numbers. By considering context and seasonal patterns, we can gain a more accurate understanding of the economy’s health.
This simplified analysis should help you better understand the complexities of industrial production data. Remember, it’s all about looking at the bigger picture!
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