April manufacturing PMI lowest since November 2011

Financial year 2013-14 began with India’s manufacturing sector expanding at its slowest pace since November 2011, according to the HSBC purchasing managers’ index (PMI). In April, manufacturing PMI stood at 51 points; in November 2011, too, it was 51.

In March, the PMI stood at 52 points, against 54.2 in February and 53.2 points in January. A reading of more than 50 points indicates expansion, while one below 50 shows contraction.

Markit Economics, which compiles the PMI data, said the fall in expansion reflected the weak performance in all the five components of the sector; production in the manufacturing sector was the lowest in 49 months. It said frequent power cuts hampered output and there was a fall in domestic orders. In April, order book volumes increased, owing to firm demand and new product launches. However, the growth in order book volumes was the slowest since September 2011.

In April, new business from abroad increased, at a pace faster than in March. Post-production inventories also grew, albeit at a marginal pace compared to March. A total of eight per cent of the surveyed companies reported higher stocks of finished goods.

Raw material and semi-finished goods bought by manufacturing companies also increased in April. The growth in input products was, however, slower than in March.

Payroll numbers rose for the fourteenth consecutive month. However, the rise was modest and manufacturing companies faced a labour shortage. Vendor performance weakened, though at a slower rate than in March.

Input cost inflation was the lowest since June 2010.

“Encouragingly, input and output price inflation eased. With the growth momentum slowing and inflation receding, RBI (Reserve Bank of India) is likely to cut the policy rate this week,” said Leif Eskesen, chief economist for India and the Association of Southeast Asian Nations, HSBC.

In April the eight core sector industries grew 2.9 per cent.