Job squeeze to get tighter as PMI manufacturing shrinks

Slowest rise in new work since September

Growth in the country’s manufacturing activities slowed down in June compared to May as new business orders were not as forthcoming, showed a widely tracked Purchasing Managers’ Index (PMI).

Employment levels remained stagnant, reflecting  cautious  stance of manufacturers. Inflation eased both at input and output levels.

The index was down at 51.3 points in June from 52.6  points in May. PMI was 51.3 points in April as well. PMI above 50 points shows expansion and the manufacturing activities have been on an expansion path since November 2013.

The data came a day after official core sector index showed that eight crucial infrastructure industries grew at a six-month high pace of 4.4 per cent in May. If PMI data is in sync with official data, it could be presumed that the core sector data may be a blip.

Weighing on the PMI were slower increases in both output and new orders. Production growth eased since May and was moderate overall. Incoming new work expanded at a modest pace that was the weakest since last September.

Pollyanna De Lima, economist at Markit and author of the report, said, “Following the pick up in the growth rates for output and new orders seen in May, June PMI data pointed to a slowdown in India’s economic upturn.”

Among segments, growth was strongest at capital goods producers. The Index of  Industrial Production (IIP) also showed that capital goods  have been on an upsurge for a few  months  now.

New export orders received by manufacturers rose for the 21st month running in June. That said, the rate of expansion moderated to the slowest since December 2013.

This is not in line with official data. The country’s  merchandise exports have been on a decline for six  months in a row till May.

The manufacturing industry saw employment remain broadly unchanged in June. Significant changes in payroll numbers have not been recorded since the opening month of 2014, and firms reportedly maintained a cost-cautious approach to hiring in the latest survey period.

On the price front, June’s data set highlighted easing inflationary pressures. Both input costs and output charges rose at rates below their respective long-run averages.

Pollyanna De Lima said," With price pressures being weak and growth losing steam, June’s dataset suggests that the RBI’s loosening cycle is, therefore, likely to continue.”

However, pace  of  monsoon in July would play a crucial  role  in determining the RBI's stance.