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Factory output improves for fourth straight month in April, says PMI Survey

Manufacturing PMI unchanged at 52.5, same as previous month

Subhayan Chakraborty  |  New Delhi 

Image via Shutterstock
Image via Shutterstock

Factory activities continued to see an improvement, maintaining growth in April on the back of robust new orders even as the rate of growth remained unchanged, shows the widely tracked purchasing managers’ index (PMI) survey.

April stood at 52.5, same as March. The 50-point mark separates expansion from contraction, indicating the health of the sector improved to a greater extent, the survey said. The December figure of 49.6 showed the beating due to demonetisation, contracting for the first time in 11 months.

had grown at its fastest pace in five months in March, marking the third straight month of expansion, on strong surge in domestic and export orders.

"Having recovered at the beginning of the year from December’s demonetisation-related contraction, growth of order books has gathered pace in each month since." Pollyanna De Lima, economist at IHS Markit and author of the report said.

However, in April, slower increases in output, stocks of purchases and employment were offset by stronger growth of new orders and lengthening delivery times, the survey said.

Overall, the upturn in order books was the most pronounced since last October while new export orders rose for the third month in a row, it added. But the rate of expansion was slight overall, easing from March. 

On the other hand, output grew solidly, though growth softened slightly since the last month. “Scratching beneath the surface we can see that consumers were the key drivers of growth as consumer goods producers registered by far the steepest expansions in both production and new orders" Lima added.

However, it is crucial to note that manufacturing jobs rose for the second consecutive month in April, after many months of negative or insignificant growth in job growth. This is attributed to a combination of greater production needs and expectations of a pick up in demand. Nonetheless, the pace of employment growth remained slight overall.

With regards to outstanding business, accumulation continued for the eleventh straight month. This came to down to surveyed businesses pending client payments. But at the same time, stocks of finished goods dropped for the twenty second month running during April. However, the rate of depletion slowed to the weakest in the year to-date.

This is tied to the fact that suppliers’ delivery times lengthened in April, amid reports of lorry strikes.

However, inflationary pressures intensified, with manufcatuers seeing purchasing costs go up for the nineteenth consecutive month in April manly for metals, chemicals and plastics.

But this did not lead to rise in charge as less than 5 per cent of manufacturers raised their output prices in April, while almost 93 per cent signalled no change. Firms that reduced charges mentioned attempts to win new customers.

Also, goods producers were at their most optimistic since last November, when the government had come out with the exercise. Capacity expansion plans, new product developments, greater advertising and favourable market conditions were cited as expected to underpin output growth in the year ahead.