(Bloomberg) — India’s economy left cratered by the pandemic is drawing energy from one of its invisible and often-neglected engines: farmers.
Business leaders, policy makers and politicians alike are pinning hopes on the rural sector as bountiful rains have set the stage for another year of record crops. Higher disposable incomes with farmers are expected to boost demand from automobile to cement to gold jewelry.
That contrasts with the urban areas, where companies are still struggling to boost their sales following the pandemic that has hit business activities, hurt demand and caused labor shortage. The adverse impact of the world’s strictest lockdown in March continues to haunt, but the hinterland is holding out hope.
Maruti Suzuki India Ltd. and the local unit of South Korea’s Hyundai Motor Co., the two main players in India’s car market, said October sales were the best-ever for any month. Hero MotoCorp Ltd., the world’s largest maker of motorcycles and scooters, as well as smaller rival Bajaj Auto Ltd., reported record sales, as rural markets provided a cushion against a downturn in cities.
“We have seen a stronger demand from rural areas across categories for our products as compared to last year,” Srinivasu Allaphan, director of sales and marketing at JK Tyre & Industries Ltd. said in an email response. “We expect it to sustain for the next three quarters. Higher sales in rural markets will compensate for the losses in urban and semi-urban towns.”
Rural incomes have stayed strong as production of monsoon-sown food grains is estimated to hit record 144.5 million tons. The government’s move to raise support prices for some crops and boost spending on rural employment programs have also supported incomes of farmers and laborers.
“Despite Covid-19 and the related lockdown, the agricultural activities across the country have almost remained unaffected. This has raised the hope that rural demand could drive the economic recovery,” according to India Ratings and Research Ltd., a unit of Fitch Ratings Ltd.
Some companies reported strong demand for their products and services, such as automobile, cement, steel, tires and jewelry, in rural areas.
Hindustan Unilever Ltd., Asia’s biggest maker of personal care products by market value, said its sales jumped the most since 2011. “We are seeing rural markets as well as smaller towns perform relatively better,” Sanjiv Mehta, chairman and managing director of the company, which sells its products through 8 million outlets in the nation, said on a conference call.
Tractors, passenger cars and light commercial vehicles are seeing a healthy demand as rural buying continues to be strong, according to Mahindra & Mahindra Financial Services Ltd. Farm equipment makers echoed the sentiment. “We continue to witness unprecedented retail demand,” said Hemant Sikka, president at Mahindra & Mahindra Ltd., which also makes tractors.
Even construction activities gathered pace. JSW Steel Ltd.’s retail sales volume more than doubled from a quarter earlier in the July-September period, the company said, while Ajoy Chawla, chief executive officer of the jewelry division of Titan Co., said demand in tier 2 and 3 markets was fueled by weddings that were postponed earlier.
Some farmers preferred to invest in gold. “The post-Covid economic uncertainties will further strengthen demand, as gold has emerged as the safest investment option,” said Ahammed MP, Chairman of Kerala-based Malabar Gold & Diamonds. Tanya Rastogi, director of Lala Jugal Kishore Jewellers, said the rural sector is an “untapped treasure for the jewelry industry.”
Bharat Petroleum, the nation’s second-biggest fuel retailer, said its sales in urban pockets had almost halved, prompting it to quickly focus on the rural and highways segments to contain the market share loss. “We want to capture the rural presence and the Indian rural growth,” said N. Vijayagopal, the company’s finance director.
Flash in the Pan?
Demand for everything from tractors to jewelry notwithstanding, rural India alone may not be able to underpin a recovery in the economy that’s headed for its worst annual contraction on record, according to top company officials and analysts. With more than eight million reported infections, the South Asian nation is the second-worst-hit by the pandemic after the U.S. and risks remain.
While demand is “good,” and is likely to remain so for the rest of the year due to a good monsoon, it’s difficult to predict sales beyond that, R.C. Bhargava, chairman of automaker Maruti, told reporters. A rush to own private vehicles as people move away from mass transport will be over by January, he said.
Automobile inventories had piled up in anticipation of strong sales during the October-November festive season. Sales were already going through their worst slump even before the virus, and pent up demand during the nationwide lockdown led to increased sales on a lower base.
“I would not really bet on the mass consumer coming back in a hurry because so far I am not seeing any evidence of it,” Rajiv Bajaj, managing director at Bajaj Auto, told CNBC TV-18. “I’m extremely concerned, I’m very anxious.”
Rural demand will perk up somewhat, but will not be able to offset the shortfall in urban demand because the share of agriculture in gross value added of the Indian economy ranged between 14.6% and 17.8% during 2012-13 to 2019-20, according to India Ratings and Research.
Some experts highlighted that India is witnessing an uneven recovery, where upper-income groups are seeing a rapid and strong improvement in their economic conditions, while those with lower incomes are losing ground.
“I must say that while parts of the marketplace are coming back to normal, it still is a reasonable K-shaped recovery,” said Dipak Gupta, joint managing director at Kotak Mahindra Bank Ltd. “Unfortunately, the upper part of the K-curve is still small as compared to the lower part.”
©2020 Bloomberg L.P.
Remarks by President Trump on the Economy – Whitehouse.gov
James S. Brady Press Briefing Room
12:31 P.M. EST
THE PRESIDENT: Well, thank you very much. And I just want to congratulate everybody. The stock market, Dow Jones Industrial Average just hit 30,000, which is the highest in history. We’ve never broken 30,000. And that’s despite everything that’s taken place with the pandemic. I’m very thrilled with what’s happened on the vaccine front. That’s been absolutely incredible. It’s — nothing like that has ever happened medically. And I think people are acknowledging that, and it’s having a big effect.
But the stock market has just broken 30,000. Never been broken, that number. That’s a sacred number: 30,000. Nobody thought they’d ever see it. That’s the ninth time since the beginning of 2020, and it’s the 48th time that we’ve broken records in — during the Trump administration. And I just want to congratulate all the people within the administration that worked so hard. And most importantly, I want to congratulate the people of our country, because there are no people like you.
Thank you very much, everybody. Thank you.
12:32 P.M. EST
China’s Li Sees Economy Returning to ‘Proper’ Range Next Year – Yahoo Canada Finance
The Canadian Press
NEW YORK — Best Buy Co. reported fiscal third-quarter results that blew through analysts’ expectations as the nation’s largest consumer electronics retailer enjoyed surging demand for items like home theatre and appliances that help people learn, cook, work and connect in their homes during the pandemic.
The Richfield, Minnesota-based retailer, said that third-quarter profits rose 33% while sales were up 21%. Sales at stores opened at least a year rose 23%, while online sales in the U.S. surged 174%.
Still, shares fell 5% in Tuesday morning trading as Best Buy warned that sales could slow down during the current quarter as the number of virus cases surge.
“As we start the fourth quarter, the demand for the products and services we sell remains at elevated levels, but similar to last quarter, it continues to be difficult for us to predict how sustainable these trends will be,” Matthew Bilunas, Best Buy’s chief financial officer, told analysts during the call. “In fact, we are seeing COVID cases surge throughout the U.S. and Canada at a time of significant holiday volume through our stores, online and supply chain. “
Bilunas also noted other factors such as potential government stimulus, the risk of continued high employment and the availability of inventory like computers to match customer demand.
Best Buy joins big box stores like Walmart, Target, Home Depot and Lowe’s in reporting strong fiscal results. Unlike mall-based stores and other businesses that sell non-essentials, big box retailers were allowed to stay open during the lockdown in the spring and have all seen their dominance increase as consumers focus on necessities and home-related activities.
Before the pandemic, Best Buy had expanded its services to such options as at-home consulting and same-day delivery. It also sped up its online shipping. But the pandemic has forced Best Buy to adjust its operations and launch new shopping experiences that provide more convenience and safety for customers.
Early fall, Best Buy began using 250 of its stores as fast-shipping hubs for online orders. It’s now adding 90 more locations during the holiday period. It says its goal is to have all 340 stores ship more than 70% of its ship-from-store units during the holiday quarter. It’s also testing new store formats as it transforms locations to fulfilment hubs.
For example, in four Minneapolis locations, Best Buy reduced its square footage for shopping to 15,000 square feet from an average of 27,000. The product assortment on the sales floor will still include the primary categories these locations featured before the remodel, but instead the focus will be on the most popular items, the retailer said. The remodels will result in increased space for staging product for in-store pickup and to help ship-from-store transactions, as well as provide the ability to stage inventory for items that may not be on the sales floor.
Best Buy reported fiscal third-quarter profit of $391 million, or $1.48 per share, compared with $293 million, or $1.10 per share, in the year-ago period. Earnings, adjusted for restructuring costs and amortization costs, were $2.06 per share.
The results exceeded Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of $1.76 per share.
The consumer electronics retailer posted revenue of $11.85 billion in the period, also beating Street forecasts. Eight analysts surveyed by Zacks expected $11.02 billion.
Shares fell $6.69 to $1150 in late morning trading. Shares have increased 39% since the beginning of the year, while the S&P 500 index has increased 11%. The stock has increased 69% in the last 12 months.
Elements of this story was generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on BBY at https://www.zacks.com/ap/BBY
Anne D’Innocenzio, The Associated Press
German economy grew by 8.5% in third quarter, but recession fears grow – The Guardian
BERLIN (Reuters) – Germany’s gross domestic product grew by a record 8.5% in the third quarter as Europe’s largest economy partly recovered from an unprecedented plunge caused by the first wave of the COVID-19 pandemic in spring, the statistics office said on Tuesday.
The stronger-than expected rebound was mainly driven by higher household spending and soaring exports, the office said.
“This enabled the German economy to make up for a large part of the massive decline in gross domestic product caused by the coronavirus pandemic in the second quarter of 2020,” it added.
The reading marked an upward revision to an earlier flash estimate of 8.2% growth, and followed a 9.8% plunge in the second quarter.
The outlook is clouded by a second wave of coronavirus infections and a partial lockdown to slow the spread of the disease. Restaurants, bars, hotels and entertainment venues have been closed since Nov. 2, but shops and schools remain open.
Chancellor Angela Merkel and regional state premiers are planning to extend the “lockdown-light” on Wednesday until Dec. 20, according to a draft prepared for their meeting.
A contraction in the service sector is expected to weigh heavily on gross domestic product in the fourth quarter, while lockdown measures in other countries are likely to hit export-oriented manufacturers as well.
DIW economist Claus Michelsen said a decline in economic output was therefore on the cards, with initial estimates indicating a GDP drop of around 1% in the final quarter.
“Germany and many important trading partners are likely to slide back into recession,” Michelsen said.
(Reporting by Michael Nienaber and Rene Wagner; Editing by Riham Alkousaa and EKevin Liffey)
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