Factory activity growth slows to five-month low in Feb

REUTERS - Indian manufacturing activity expanded at its slowest pace in five months in February as a slowdown in new orders dragged on overall output, a business survey showed on Monday.

The HSBC Manufacturing Purchasing Managers' Index, compiled by Markit, fell for the second consecutive month, to 51.2 in February from 52.9 in January. A reading above 50 separates growth from contraction.

"Manufacturing growth in India lost momentum in February, with output and new orders expanding at softer rates than those seen in the past four months," said Pollyanna De Lima, economist at Markit.

The new orders sub-index fell to 51.9, the lowest level in five months, from January's 54.4. The drop underscored softer domestic demand, which also accounted for a slight cut in headcount at firms.

The seasonally-adjusted output index also fell to its lowest since September.

"On a positive note, foreign orders rose at a strong and accelerated pace, while the PMI remained in positive territory. These factors brighten the prospects for a rebound in output and employment in coming months," De Lima said.

Indeed, February marks the 16th straight month of factory activity expansion. And if India can grow as strongly in the coming fiscal year as the government said in its newly-released budget - expanding by up to 8.5 percent - that should boost manufacturing.

Output prices, or the inflation on goods for consumers, rose at the weakest rate in five months as manufacturers offered discounts to secure new business, according to a press statement released by Markit.

(Reporting by Siddharth Iyer; Editing by Richard Borsuk)