Morgan Stanley - Growth Acceleration
Excerpts from the latest economic digest from Morgan Stanley:
* The aggregate BSE 200 corporate sales growth (excluding energy companies) accelerated sharply to a new high of 28% YoY during the quarter ended June 2006 from 18% during the quarter ended March 2006.
* Sectors which have contributed to the overall acceleration in sales growth are materials (incl cements), utilities, consumer discretionary, engineering and construction.
* Bank credit growth has accelerated to a new high of 33%, making the current credit cycle the longest in the past 35 years.
* If the growth acceleration trend is sustained by household and government borrowing at a time when the corporate credit demand remains strong on account of capex, it could raise the risks of macro challenges in the form of higher inflation, a trade deficit and a spike up in cost of capital.
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