India Manufacturing PMI Contracts For Second Straight Month

A gauge of India’s manufacturing sector contracted for the second month in a row as the coronavirus-driven isolation orders deteriorated business conditions.

The India Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, stood at 30.8 in May compared with 27.4 in April on a seasonally-adjusted basis, according to a media statement. A reading of less than 50 indicates contraction in business activity.

“The latest reading pointed to another substantial decline in the health of the Indian manufacturing sector, albeit one that was slightly softer than recorded in April,” the release said.

New orders placed with goods producers continued to fall after April’s record contraction. The rate of decline decelerated but was still the second-fastest since the series’ inception in March 2005. Firms cut staff at the quickest pace since data collection began over 15 years ago.

“The rate of workforce contraction accelerated to the fastest in the survey’s history, eclipsing the previous record set in April,” the statement said.

According to Eliot Kerr, economist at IHS Markit, the latest PMI data suggested that India’s manufacturing output fell further in May. This is particularly poignant given the record contraction in April, which was driven by widespread business closures, she said.

Exports remained a drag, with weak demand from international markets adding to the deteriorating sales trend. Input prices faced by Indian manufacturers continued to fall in May but the pace eased over the previous month. Manufacturers also cut prices of products to secure orders.

For the one-year business outlook, manufacturers remained optimistic. Confidence was supported by expectations for a return to growth once all coronavirus-related restrictions are lifted. The degree of positivity, however, eased slightly from April and remained historically subdued.

The data for services PMI is scheduled to be released on Wednesday.