Retail Inflation & More

Good morning, folks! Question. What do Soma Mondal, Kamala Harris and Dhivya Suryadevara have in common? They are all Indian women or with an India connect making news for breaking the glass ceiling. Go check them out and be inspired.

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Retail inflation continues to soar

The July numbers for retail inflation are in and we can safely say achhe din are still a fair time away. Last month, retail inflation inched up to 6.93% up from the revised rate of 6.23% in June. April and May are the gap months for inflation data this year, due to logistical challenges in collecting data.

What’s weighing it down? Food inflation remained the biggest culprit, zooming up to 9.62%. There also remains a fair amount of gap between urban and rural areas with rural inflation clocking in at 7.04% and urban inflation being slightly lesser at 6.84%. This month’ figure lies outside RBI’s medium-term target of 4% (+/- 2%).

What do we make of this data? There are three key takeaways. One, unless inflation starts beating a downward retreat, RBI may not get comfort for any further rate cut. Two, this situation looks eerily heading towards stagflation which as the name suggests is a situation of inflation despite collapsing economic scenario or a stagnation. Three, inflation is reflected in some categories despite depressed demand which could point to supply disruptions also contributing to the number. As with so many things in life, wait and watch seems to be the mantra.

Nascent hope for Indian aviation sector

Domestic air traffic in July 2020 inched up by 6% over last month, ferrying 2.1 million passengers. This came despite much lesser active routes and Kolkata airport continuing to ban flights from six major cities. Compared to last July, this year there is an unimaginable 82.3% drop in traffic.

What’s the share looking like? While Spicejet ruled the roost in terms of occupancy rates, Indigo continued to surge ahead to reach a market share of almost 60%, mostly at the cost of Go Air which saw it’s market share drop from 9.9% to 3.9% from March to June. Friendly tip. If you are booking yourself a Vistara flight, make sure to check multiple times with them if the flight is taking off as in July they share the distinction of cancelling 22% flights!

In other news: While the domestic aviation sector is trying it’s best to fight back to life, things are not much better on the international front. On Thursday, Air India announced closure of office in Vienna, Milan, Madrid, Copenhagen and Stockholm. Why? No commercial or Vande Bharat flights from these cities.

World manufacturing set to diversify

You know things are serious when some one like Young Liu says China’s days as the world’s factory are numbered. Young Liu who? He’s the chairman of Foxconn, a company that brands like Apple, Dell and Nintendo depend for gadget manufacturing.

Why would he say that? The world’s biggest market and the world’s factory have to be friends or atleast be able to tolerate each other. Try telling that to Donald Trump and Xi Jinping. For Foxconnn, the proportion of manufacturing outside China has risen from 25% last June now to 30%, and the ratio is bound to keep increasing as Young Liu sees manufacturing hubs mushrooming everywhere from India to South east Asia and even Americas.

Looking inward: Foxconn is not the only company to be thinking like this. As this report from South China Morning Post shows, there is a slew of factory closures hitting China’s 230 million migrant workers hardest. No wonder, China is intending to lean more on domestic demand although with the high levels of indebtedness and job losses that’s going to be no cakewalk either.

IN SNIPPETS

Income tax transparent mode on: As part of fulfilling the promise of getting more people to a hassle free income tax payment regime, PM Modi launched a new portal of Transparent Taxation – Honoring the Honest. One of the biggest features designed is to reduce the harassment by tax officials through faceless assessment. As for more people, thresholds have been lowered with a widened scope for reporting to tax authorities.

Spreading the net wide: Softbank and Berkshire Hathway-backed Paytm is looking to make their mark on more and more financial services. Paytm Money was already into mutual fund investing and that too direct. Now, it has come out with retail stock broking charging a mere Rs. 10 for intra day trading. Going by their earlier success, they could soon see high volumes and of course leading to even more volatility in Indian equity markets.

Indians’ stickiness to oil still leaves beginning to exhaust: While we are out of the depths of fall in demand seen for oil in April, July saw a 3.5% drop in fuel consumption over the previous month and 11.7% Yoy. Demand for the fuel of the economy may well have plateaued, if this infection continues to ravage the way it has so far.

When going below million becomes good news: Wall Street was in for a pleasant surprise when the US weekly jobless claims came in at 963,000 instead of their expectation of 1.1 million. This is the first time since Mid-March that the number has dropped below the 7 digits. But might as well wait and watch if this is a one-time-event or a finally a positive trend.

Uber Lyft driver employment status in California changes to “it’s complicated”: To leave or to fight? That is the question plaguing ride hailing services Uber and Lyft in the sunny state of California as state law holds that all their drivers need to be reclassified as employees. Which comes with it’s baggage of benefits and associated costs. We sense that there is more drama in the offing on this front.

MARKET PULSE

Equity markets in India were almost even stevens. Yes, we are running out of words to say flat in different ways. The deepest red in the Sensex was sported by Bharti Airtel while L&T hued on the most gains of 4%. Ashok Leyland rallied by 13% while Tata Consumer Products hit a record high. One flat number hides under it so many varied movements.

For the first time in 2020, FIIs turned net positive in equities on Thursday, although DIIs did not seem to share the same enthusiasm or direction of money flow.

Mint cheered on the volatility exhibited by the yellow metal in the hope that it serves as a warning to not give in to the lure of lending 90% of this inflated value as a gold loan.

WILD CARD

This is one of the most out-of-whack news that we have come across is ages. In a quest for Donald Trump’s “perfect” hair, the US government is proposing to change the maximum water pressure in shower heads from 2.5 gallon per minute overall to making that limit eligible for each nozzle. Basically, more water , higher pressure showers. In case you are wondering, water scarcity on the blue planet? What’s that?

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