Manufacturing PMI up marginally; growth of domestic orders, production slow

Growth in India’s domestic factory orders and production decelerated to an eight-month low in April amid the worsening Covid-19 situation, but the overall manufacturing activity improved marginally, led by new export orders, according to a private survey.
 
The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) rose marginally to 55.5, after falling to a seven-month low of 55.4 in March, as new export orders grew the fastest since October. The 50-point mark separates expansion from contraction. The PMI is a month-over-month indicator and shows changes over the previous month, and not over the previous year.
 
Consumer goods was the strongest-performing category in April, followed by capital goods and intermediate goods. “The PMI results for April showed a further slowdown in rates of growth for new orders and output, both of which eased to eight-month lows amid the intensification of the Covid-19 crisis. Still, the increases were strong by historical standards and the survey revealed other positive news,” said Pollyanna De Lima, economics associate director at IHS Markit.
 

The surge in Covid cases could dampen demand further when firms' financials are already susceptible to the hurdle of rising global prices, De Lima added. April saw the steepest increase in input costs in nearly seven years.
 
While output and sales increased at the slowest rates since last August, there was a faster upturn in international orders. New export orders increased for the eighth consecutive month in April. The rise was associated with a pick-up in international demand for Indian goods, with all three monitored sub-sectors registering expansion, the report said. The quantities of purchases expanded at one of the strongest rates seen for over nine years as firms sought to boost their inventories.
 
This is well reflected in India’s official trade data for April. India’s merchandise exports in April touched $30.21 billion, a growth rate of 197 per cent as compared to last year. Compared to April 2019, the growth rate stood at 16 per cent. Stocks of finished goods declined in April as companies reportedly utilised existing inventories to meet sales requirements. “Some firms also linked the fall in post-production stocks to a lack of raw material availability. Underlying data showed a further deterioration in vendor performance, but supplier delivery times lengthened to a lesser extent in April. Delays were often blamed on the Covid-19 pandemic, transportation issues and material shortages,” the report pointed out. PMI survey participants also signalled a steep increase in input costs, the quickest since July 2014, and upward revisions to selling prices.