PMI shows slowdown in manufacturing

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PMI shows slowdown in manufacturing
The manufacturing sector growth hit a low in august. There has been a contraction in new orders for exports, HSBC Purchasing Managers' Index (PMI).

Exports bucked the declining trend in growth till July, according to official figures.

The PMI is calculated on a survey of almost 500 private companies. In August the PMI stood at 52.6 points, while in July the same was 53.6 points in July. This index had declined for the fourth consecutive month.

However, it must be remembered that PMI is basically a survey, which is why it should be noted here that PMI will not always match official figures. For example, the PMI had showed that manufacturing growth was at a nine-month low in June this year, meanwhile the official data showed manufacturing expanded by a whopping 10% compared to 7.9% in the same month last year.

However, according to official figures exports did well July. Merchandise exports for July jumped 81.7% to $29 billion. For the first four months, exports rose almost 54% at $108.34 billion.

Rahul Khullar, Commerce Secretary was doubtful if exports could sustain its momentum. He said, from August, the growth may witness a fall.

According to a statement by Markit Economics, “manufacturers had to deal with soaring input prices, with the rate of cost inflation the fastest in four months." Output prices continued to rise at a historically marked rate.

The index also showed weaker expansion of new business that led to a decline in the finished goods stock. Since March 2010, for the first time back log had fell, as pressure on operating capacity subsided.

One of the analysts was quoted in that 'The numbers suggest moderation rather than a collapse in growth, and they confirm inflation remains the primary policy concern.'

With headline inflation in July standing at 9.22 % and food inflation entering double digits, the Reserve Bank of India is widely expected to raise policy rates by 25 basis points later this month.

Read more about: economy, industry, pmi, manufacturing
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