Manufacturing PMI hits 14-month high in February on export orders

New work orders, especially international ones, helped catapult manufacturing sector activity to a 14-month high in February after two straight months of contraction, the widely tracked Nikkei India Services Purchasing Managers’ Index (PMI) showed. 

Manufacturing PMI for February stood at 54.3, up from 53.9 in January, indicating bulk orders from clients in key export destinations in February. The 50-point mark separates expansion from contraction.

Amid reports of successful advertising efforts, supportive government policies and strengthening demand conditions, inflows of new work at Indian goods producers continued to expand during February. The increase was the 16th in as many months and the most pronounced since October 2016, the PMI report said.

Subsequently, job creation was sustained, taking the current spell of growth to 11 months. The upturn in employment was one of the best seen in six and a half years, as goods producers sought to expand output capacities to meet strengthening demand from both domestic and external sources.

“The survey results suggest that manufacturing will likely provide a stronger contribution to overall economic growth in the final quarter, provided that March figures stay on this favourable path. For FY19 (financial year 2018-19), IHS Markit has revised higher its GDP growth forecast, from 7.0 per cent to 7.1 per cent, amid the announcement of fiscal stimulus for the new interim Budget and the policy rate cut announced in February.” Pollyanna De Lima, principal economist at IHS Markit, and author of the report, said.

Manufacturing output rose at the quickest rate since December 2017, boosted by strong inflows of new business, technological progress, beneficial public policies and positive market conditions. But despite the uptick in production volumes, holdings of finished goods declined again. Moreover, the pace of depletion accelerated from January and was solid overall. Survey members indicated that stocks were utilized to fulfill order requirements.

“Q4 2018-19 should mark further strengthening of manufacturing GVA and upward movement of GDP growth,” Economic Affairs Secretary Subhash Chandra Garg said in a tweet. India’s economic growth slipped to a five-quarter low of 6.6 per cent in the October-December period of 2018-19, mainly because of poor performance of farm, mining and manufacturing sectors.

The Central Statistics Office, which releases the national account data, last month revised its forecast for GDP growth for 2017-18 to 7.2 per cent from the earlier estimate of 6.7 per cent. It also revised the actual growth rate in 2016-17 to 8.2 per cent from the 7.1 per cent estimated earlier.