India Manufacturing PMI Plummets In Response To Nationwide Lockdown
The drop is the sharpest contraction in manufacturing conditions since data collection began over 15 years.
A full month under a nationwide lockdown, which led to a sudden stop in most business activities, pushed a gauge of India’s manufacturing sector to an all-time low.
The India Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, fell to 27.4 in April from 51.8 in March on a seasonally adjusted basis, according to data released on Monday. A reading of less than 50 indicates contraction in business activity.
The drop seen in the manufacturing PMI is the sharpest contraction in manufacturing conditions since data collection began over 15 years, IHS Markit said in its release.
In an environment of severely reduced demand, new orders fell for the first time in two-and-a-half years and at the sharpest rate in the survey’s history, far outpacing that seen during the global financial crisis.IHS Markit Release
The deterioration in business conditions has taken a toll on employment as well, the survey indicated.
“Deteriorating demand conditions saw manufacturers drastically cut back staff numbers in April,” the release stated. The reduction in employment was also the steepest in the survey's history.
Meanwhile, both input costs and output prices were lowered markedly as suppliers and manufacturers themselves offered discounts in an attempt to secure orders, the release added. However, the time for delivery of inputs rose due to disruptions in the supply chain.
In the latest survey period, record contractions in output, new orders and employment pointed to a severe deterioration in demand conditions. Meanwhile, there was evidence of unprecedented supply-side disruption, with input delivery times lengthening to the greatest extent since data collection began in March 2005.Eliot Kerr, Economist, IHS Markit
Future outlook, though muted, saw an uptick compared to the previous month. Sentiment regarding the 12-month outlook for production moved up on hopes that demand will rebound once the Covid-19 threat has diminished and lockdown restrictions eased.
The services PMI, scheduled for release on Wednesday, is also likely to show a sharp fall.
“Though the month of May might see some improvement, as restrictions have been eased in many parts of the country, we continue to see subdued economic growth. We maintain our forecast that the RBI’s Monetary Policy Committee will reduce the repo rate by another 90 basis points by the August policy meeting,” said Rahul Bajoria, chief India economist at Barclays.
Global Manufacturing Collapse
The pandemic has taken a toll on manufacturing across nations.
As such, the fall in manufacturing PMI seen in India has been mirrored across economies in Asia and globally.
Economies such as the United States slipped saw manufacturing slip into contraction zone in March itself and fell further in April. In Asia, too, PMI readings continued to fall. Based on data released so far, India’s Manufacturing PMI reading is the lowest in the region.