Subdued demand prevented firms from hiring more hands. Input inflation rose at the quickest pace since May. Output prices were not raised that much, which prompted experts to call the Reserve Bank of India (RBI) to cut rates to spur growth, minutes before the RBI was to unveil its monetary policy review.
PMI fell to a 25-month low of 50.3 in November, from 50.7 in October. A reading above 50 marks expansion of the sector, while a score below this level means contraction.
On Monday, the official GDP data was released for the second quarter, ended September 2015. That data showed that manufacturing rose by a record 9.3 per cent in three months. This was the highest growth since the new GDP series came up from 2011-12.
Sub-sector data highlighted consumer goods as the best performing category, while operating conditions at intermediate companies deteriorated for the first time since December 2013.
New business from abroad increased further in November. Albeit slight, the rate of growth was the strongest in three months. New export orders rose at consumer and intermediate goods firms, while a contraction was seen in the capital goods category.
According to government data, merchandise exports declined for 12 consecutive months in October.
Following a marginal increase in the prior month, manufacturing employment in India was broadly unchanged in November. This was signalled by the respective index recording only fractionally above the no-change mark of 50.
Outstanding business held by Indian goods producers rose in November, amid evidence of delayed payments from clients and labour shortages. Inventory levels decreased during November.
Stocks of purchases declined for the first time in one-and-a-half years, which panellists associated with falling quantities of inputs bought. Holdings of finished goods were depleted at a marked rate, which was the second-fastest in three years.
Input cost inflation accelerated to the strongest in six months during November, but remained below the long-run series average. Companies reported higher prices paid for metals, textiles and food.
Factory gate charges were subsequently raised. The rate of inflation was, however, only marginal.
Pollyanna De Lima, economist at Markit Economics, which is the compiler of the PMI survey, said, “The slowdown in growth combined with weak inflationary pressures support further rate cuts. Input cost and output charge inflation as measured by the survey were much lower than their respective long-run averages.”