India's manufacturing activity for July falls

Business

oi-Sunil

By Sunil Fernandes

Updated: Thursday, August 1, 2013, 11:55 [IST]

India's manufacturing activity slumped in the month of July and was nearing contraction. According to the HSBC, India, Manufacturing PMI the July's seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) posted only fractionally above the 50.0 no-change threshold.

Down from 50.3 in June to 50.1, the latest reading was indicative of a broad stagnation of manufacturing operating conditions in India. If the indicator falls below 50, it would lead to contraction in manufacturing, which now seems probable in the coming months.

"Output fell for the third consecutive month in July, amid evidence of falling new orders, tough economic conditions and raw material shortages. The rate of decline, however, was fractional and eased since June. Lacklustre demand conditions had resulted in a further contraction of incoming new work, with sector data highlighting declines in the intermediate and investment goods sectors. Conversely, consumer goods producers signalled higher levels of new orders, but the rate of expansion was modest," the HSBI PMI states.

Commenting on the India Manufacturing PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said:
"Activity in the manufacturing sector was broadly flat in July. Output fell by less, but order flows weakened led by slower growth in export orders. Moreover, inventory accumulation and employment growth slowed. Of concern, inflation pressures firmed for both input and output prices, partly on the back of higher imported inflation due to the weaker currency. The data suggests that the RBI will likely have to keep policy rates on hold for a while given lingering inflation risks and that the recently introduced currency stabilization measures will not be lifted anytime soon."

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