Production growth eases as new orders rise at weaker rate
The health of the Indian manufacturing economy improved further in June, but output growth eased on the back of a weaker rise in new business inflows. Workforce numbers were, once again, unchanged during the month, reflecting firms' efforts to keep expenses stable. Encouragingly, inflation rates softened, with both input costs and output charges rising at below-trend rates.Recording above the 50.0 no-change mark for the twentieth successive month, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) - a composite single - figure indicator of manufacturing performance - pointed to continued improvements in operating conditions. That said, the index fell from 52.6 in May to 51.3 in June.
Weighing on the PMI were slower increases in both output and new orders. Production growth eased since May and was moderate overall. Incoming new work expanded at a modest pace that was the weakest since last September.
Sector data highlighted rising output and order book volumes across the three monitored market groups. For both variables, growth was strongest at capital goods producers.
New export orders received by Indian manufacturers rose for the twenty-first month running in June. That said, the rate of expansion moderated to the slowest since December 2013.
India's manufacturing sector saw employment remain broadly unchanged in June. Significant changes in payroll numbers have not been recorded since the opening month of 2014, and firms reportedly maintained a cost-cautious approach to hiring in the latest survey period
Pre-and post-production stocks both increased in June. Survey participants linked the rise in holdings of finished goods to forecasts of higher inflows of new work. Nonetheless, the rate of accumulation was modest and weakened since May. Growth of stocks of purchases also eased and was the slowest in eight months.
June data highlighted a twentieth consecutive monthly expansion of buying levels, with panellists indicating that higher quantities of inputs purchased reflected rising production needs. However, purchasing activity grew at a moderate pace that was slower than in May and below the series long-run average.
On the price front, June's dataset highlighted easing inflationary pressures. Both input costs and output charges rose at rates below their respective long-run averages.
Following five successive months of improving vendor performance, suppliers' delivery times were unchanged in June. Meanwhile, backlogs of work rose, amid evidence of delayed payments from clients.
Commenting on the Indian Manufacturing PMI survey data, Pollyanna De Lima, Economist at Markit and author of the report said, "Following the pick up in the growth rates for output and new orders seen in May, June PMI data pointed to a slowdown in India's economic upturn. New business expanded at a noticeably weaker pace, in part reflecting a loss of momentum in export business. Moreover, manufacturers remained in cautious spirits and employment numbers were unchanged once again. Nonetheless, broad-based increases in both production and order book volumes were maintained, with consumer, intermediate and investment goods producers all recording growth. On the price front, there was welcome news from an easing in inflation rates. Costs and charges both rose at rates that were historically muted. With price pressures being weak and growth losing steam, June's dataset suggests that the RBI's loosening cycle is, therefore, likely to continue."
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