India’s Manufacturing PMI Drops In August But Remains In Expansion Mode
A gauge of activity across India’s manufacturing sector fell but remained in the expansion zone, indicating a softer pace of growth in economic activities.
The IHS Markit India Manufacturing Purchasing Managers’ Index stood at 52.3 in August compared with 55.3 in July, according to its media statement. A reading above 50 indicates economic expansion.
August saw a continuation of the Indian manufacturing sector recovery, but growth lost momentum as demand showed some signs of weakness due to the pandemic. Yet, factory orders and output rose across the consumer, intermediate and investment goods categories.Pollyanna De Lima, Economics Associate Director, IHS Markit
Manufacturing production increased for the second straight month in August. But growth was curbed by the pandemic and elevated price pressures. The overall rate of expansion was modest and below its long-run average.
New orders also rose for the second straight month, but at a softer pace. While some firms suggested that favourable market conditions and fruitful advertising boosted demand, others said sales fell due to the pandemic.
August data pointed to back-to-back increases in new export orders, but here, too, growth lost momentum.
Indian manufacturers signaled another monthly rise in cost burdens, taking the current stretch of inflation to 13 months. While the pace softened, it remained elevated by historical standards.
Cost pressures were attributed to raw material scarcity and transportation problems. Manufactures in turn, continued to pass on part of the additional cost burden to clients, with inflation rising to a three-month high.
While the speedy dispatch of purchased goods caused a fall in holdings of finished products, pre-production inventories continued to rise as firms purchased additional materials in tandem with greater output needs. Both buying levels and input holdings increased at softer rates, however, as raw material shortages among suppliers and a lack of container availability resulted in a further lengthening of average lead times, the statement said.
Employment levels were broadly stagnant in August as companies reportedly had sufficient workforces to cope with current requirements and confidence remained subdued.
“The 12-month outlook for production remained positive, though confidence faded amid worries concerning the lasting scars of the pandemic and the adverse impact of rising costs on companies’ finances parallel to a lack of pricing power,” Lima said.