Core Sector Growth Plummets to Seven-Month Low as Fossil Fuel Output Collapses

Core Sector Growth Plummets to Seven-Month Low as Fossil Fuel Output Collapses​

India's core sector growth decelerated sharply, hitting a seven-month low of 0.5 percent in May. This significant slowdown reflects weakening performance across key energy-related segments, which offset the resilience seen in cement and steel output.

The latest economic print signals a renewed loss of momentum within infrastructure activity. The contraction was driven primarily by broad deterioration in fuel and mining sectors, indicating widespread stress in upstream energy production.

Fossil Fuel Contraction Drives Sector Slowdown​

The deceleration was starkly evident in the energy resource segmentations. Coal output fell 9.3 percent in May, worsening from an 8.8 percent decline recorded in April. Similarly, crude oil production contracted by 4.6 percent during the same period. Natural gas output also declined, falling 4.9 percent in May.

Petroleum refinery products saw perhaps the sharpest deterioration across all categories. These products slipped 8.7 percent in May, a significantly worse outcome compared to the marginal 0.5 percent decline reported in April. This decline points toward substantial stress within downstream energy processing capacities.

Fertilizer output continued its contraction trend for the third consecutive month. It declined by 0.9 percent, although this rate eased considerably from the sharp declines noted in April and March.

Infrastructure Resilience Provides Limited Support​

In contrast to the cooling energy market, construction-linked sectors maintained relative strength. Cement output registered a solid growth of 8.4 percent in May, slightly surpassing the 8.2 percent increase seen in April. Steel production also managed an increase of 5 percent.

Electricity generation emerged as a critical stabilizing factor for headline growth. It accelerated to 8.7 percent in May from 5.6 percent in April, providing strong support to mitigate overall sector weakness.

Market Outlook and Sector Trajectory​

The core sector had previously demonstrated signs of recovery earlier in the year, moving up from 1.2 percent in March to 1.8 percent in April. However, the sharp moderation observed in May suggests that this prior recovery has stalled entirely.

The sector had achieved a robust expansion late last year, peaking at 6.5 percent in August. The current trend, however, is marked by persistent weakness in fossil fuel production and uneven industrial demand across various segments.