Output growth softens in April 2016 amid broadly stagnant inflows of new work: Nikkei India Manufacturing PMI

Nikkei India Manufacturing PMI fell from 52.4 in March 2016 to 50.5 in April 2016

PMI data indicated that Indian manufacturers raised output at a slower pace in April 2016, as new business inflows were broadly unchanged during the month. The upturn in new export orders was sustained, although growth was at a six-month low. There were divergences with regards to stock levels, with holdings of finished goods continuing to fall while pre-production inventories rose again. On the price front, input costs increased at the fastest rate in 11 months, whereas charge inflation eased since March.

Reflecting softer contributions from four of its five sub-components (the exception being suppliers delivery times), the seasonally adjusted Nikkei India Manufacturing Purchasing Managers IndexTM (PMI)TM - a composite single-figure indicator of manufacturing performance - fell from 52.4 in March to 50.5 in April. The latest figure pointed to the weakest improvement in business conditions in the current four-month sequence of above-50.0 readings.

Indian manufacturers saw incoming new orders broadly stagnate in April, following three consecutive months of growth. In contrast to the picture for total new business, new work from abroad continued to increase. Nonetheless, new export orders expanded at the slowest pace since last October.

In spite of the stagnation in new work, goods production increased in April. The rate of expansion was only slight and softened since March, however. Meanwhile, buying levels rose for the fourth successive month, which in turn resulted in a further accumulation in stocks of raw materials and semi-finished products.

April saw manufacturing employment in India remain broadly unchanged, a trend that has been evident for almost two years.

Concurrently, unfinished business rose. Where backlogs of work increased, survey members blamed delayed payment from clients as well as shortages of some raw materials for this. Nevertheless, the rate of accumulation was only slight and in line with the long-run series average.

Input cost inflation accelerated to the fastest since May 2015 during April. According to panel members, a range of raw materials - such as metals, chemicals, plastics, paper and food - had increased in price.

Part of the additional cost burden was passed on to clients as selling prices rose further. That said, the rate of charge inflation softened marginally since March.

Finally, stocks of finished goods fell at the sharpest rate since August 2015, while suppliers delivery times lengthened.

Commenting on the Indian Manufacturing PMI survey data, Pollyanna De Lima, Economist at Markit and author of the report, said: "PMI data for India show a marked slowdown in output expansion during April, as growth of new work ground to a halt following a robust increase in the prior month. "Looking into the sub-sector data, consumer goods producers fared better than their intermediate and investment goods counterparts where both output and new orders declined.

"A softer overall increase in output prices meanwhile suggests a strongly competitive environment, as cost inflation in fact accelerated to the fastest since May 2015."

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