Consumer Goods Output Gets A Durable Boost, Rises Sharply In October

Consumer goods output in October rose sharply to touch 12.1 percent, data from the Index of Industrial Production (IIP) released on Wednesday shows. The growth seen by the sector, which includes durables and non-durables products, was second only to capital goods, which rose 16.8 per cent in October.

This growth seen by the consumer goods was led mainly by the durables market, which rose 17.6 per cent, the highest in 11 months. The overall increase in consumer goods output for October was also the sharpest in 11 months, sector experts say, aided in part by a low base. “While the onset of the festive season in 2017 was early (Diwali fell in October),” explains Y V Verma, a consumer durables expert, who has worked earlier with companies such as LG and Onida. “This year, Diwali was in November,” he says. “There was sufficient build up in terms of output in the marketplace in October and consumers too were ready to buy,” he adds.

Uninitiated is an indirect indicator of consumer demand. Higher IIP numbers imply demand in the marketplace is strong. This helps sales. Consumer durables companies say they gained due to latent demand in the marketplace as well as lower goods and services tax (GST) on appliances.

In July, the government had slashed the GST on washing machines and refrigerators by 10 percent, while TV screens up to 27-inches saw GST reduce from 28 per cent to 18 percent. Growth in appliance sales, according to industry executives, in the run-up to Diwali, was between 12 and 15 percent year-on-year. A strong retail push, both online and offline, as well as a deeper penetration of consumer finance, says Eric Braganza, president, Haier Appliances India.

The interesting bit is that offtake of premium durable products was also high during Diwali. While the IIP does not give a specific break-up of production of premium, semi-premium, and non-premium durable products, experts say companies withheld price hikes (caused by customs duty increases) in the premium segment to improve offtake. This had a positive impact on sales.― Business Standard

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