AMEP index dips in Nov as economic recovery loses steam

BL Mumbai Bureau | | Updated on: Dec 23, 2021
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Decline primarily driven by weak tractor sales, e-way bills, auto sales, exports, power generation, says credit agency

Acuité Ratings & Research said its proprietary, AMEP (Acuité Macroeconomic Performance) index, fell to 111 in November 2021 from a post-Covid peak of 124.9 in October 2021, showing a loss in the momentum of economic recovery as the pent up and festive consumption demand dropped in intensity.

The credit rating agency observed that after expansion in two consecutive months, the AMEP index fell, indicating a loss in momentum of economic recovery in November.

Slowdown in recovery

“The contraction of the index sequentially by 11.2 per cent month-on-month (m-o-m) is partly driven by seasonality. However, the magnitude of deceleration is higher than the average of around 6.5 per cent recorded in the last two years in November,” the agency said in a statement.

Out of 16 indicators covered by the AMEP index, only five posted a sequential expansion in November (vs. 14 in October), while 11 saw a contraction, highlighting a slowdown in the breadth of economic recovery.

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Acuité observed that the decline in the index was primarily driven by a weak trend in tractor sales, e-way bills, auto sales, exports, and power generation. “...a healthy traction is visible in indicators such as passenger freight, PMI manufacturing, GST collections, employment, and credit growth,” it said.

The agency observed that tractor as well as well as two-wheeler sales, a key harbinger for a recovery in rural demand, recorded a significant contraction amid excess and unseasonal rains in some pockets of the country along with delayed harvest in Kharif crops which impeded cash accruals and thereby, fresh purchases.

Supply chain ‘crippled’

On the other hand, the shortage of semiconductors has crippled the entire supply chain weighing on auto sector which thwarted festive season sale.

Nevertheless, demand for high contact services sector has been witnessing a strong resurgence of late, Acuité said.

The agency assessed that continued drop in Covid cases, advancement in vaccinations coupled with festive boost and vengeance demand has remained growth supportive in Q3 (October-December) FY22, so far.

For FY22, Acuité continues to retain its GDP growth forecast at 10 per cent, albeit some downside risks from new virus mutations, supply chain disruptions and the risk of volatile capital flows arising from faster policy normalisation in some of the major economies.

Published on December 23, 2021

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