Mfg sector activity eases in Aug on softer output expansion, fall in new orders

The country's manufacturing sector activity eased for the second consecutive month in August, mainly on account of slower gains in output and decline in fresh orders, a monthly survey said Monday.

The Nikkei India Manufacturing Purchasing Managers' Index fell to 51.7 in August from 52.3 in July, as operating conditions improved at the slowest pace since May.

This is the 13th consecutive month that the manufacturing PMI remained above the 50-point mark. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

"August data signalled a further loss of growth momentum across India's manufacturing sector, reflecting slower gains in output and new orders," said Aashna Dodhia, Economist at IHS Markit and author of the report.

The PMI data suggested domestic demand conditions improved at a slower pace than the preceding month, while new export orders rose at the fastest pace since February.

Meanwhile, in response to sustained periods of expansion in output and new orders, firms were encouraged to raise their staffing levels during August.

On the price front, Indian manufacturing companies continued to face higher input costs during August. Moreover, there were reports that currency weakness contributed to higher raw material costs.

As part of their efforts to protect margins, Indian manufacturers raised their own selling prices for the thirteenth consecutive month in August but the rise was marginal and the slowest since April.

Meanwhile, Indian manufacturing companies retained optimistic projections for output in the next 12 months, but the level of sentiment eased in August.

"Some of the key headwinds facing the economy include high global oil prices, monetary policy tightening, and capital outflows from emerging markets," Dodhia added.

According to official data, the Indian economy grew at a two-year high of 8.2 per cent in the April-June quarter of current fiscal on good show by manufacturing and farm sectors.