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India Manufacturing PMI signals growth for first time in five months


The IHS Markit India Manufacturing PMI data released today for the month of August has signaled growth for the first time in five months.


The data was recorded at 52 in August rose from 46 in July. The data signals an improvement in the operating conditions across the manufacturing sector in India following contraction recorded for consecutive four months.


The manufacturers signaled a rebound in production volumes in August, they also indicated a pick up in new work. The change was led by improvement in customer demand as businesses opened after the Covid lockdown. Output and new ordered expanded at the fastest pace since February.


Decline was noticed in exports which weighed slightly on overall new orders. New business received by Indian manufactures also witnessed the fastest pace since February


Despite an expansion in new orders, job shedding continued in the Indian manufacturing sector. The relocation of employees following COVID-19 was often linked to the reduction in staffing numbers. The pace of contraction in workforce numbers softened from that seen in July but remained strong overall.


Employment restraints also lead to an increase in the backlogs rate of which was fastest since December 2012.


Supply chains were disrupted for a sixth consecutive month, with firms citing transportation restrictions, supplier delays and capacity pressures as the main drivers of lengthening delivery times.


The input prices also rose due to supply shortages and transportation delays.  Cost burdens rose for the first time since March, with the rate of input price inflation at its highest since November 2018.


Indian manufaturers remained optimistic for the next 12 months, hoping that the pandemic would pass away soon and client demand would improve. Nevertheless market uncertainity and onset of global recession weighed slightly on the degree of confidence, which was below the series average for the month of August.


The PMI data is a leading indicator & released monthly for developed and emerging economies worldwide.
The numbers provide insight into economic conditions across the manufacturing and service sectors, with national
PMI readings for the respective sectors based on responses from panels of senior purchasing executives (or similar) at more than 400 companies for each survey.


The data Readings range from 0 to 100. Readings above 50.0 signal an improvement or increase from the previous month. Readings below 50.0 signal a deterioration or decrease from the previous month. The greater the divergence from 50.0 the greater the rate of change signaled. The indexes are seasonally adjusted.


Commenting on the latest survey results, Shreeya Patel, Economist at IHS Markit, said:

“August data highlighted positive developments in the health of the Indian manufacturing sector, signalling moves towards a recovery from the second quarter downturn. The pick-up in demand from domestic markets gave rise to upturns in production and input buying.  However, not all was positive in August, delivery times lengthened to another marked rate amid ongoing COVID-19 disruption. Meanwhile, employment continued to fall despite signs of capacity pressures, as firms struggled to find suitable workers.  The rate of input price inflation was solid, following four monthly declines in cost burdens. Firms, however, continued in their efforts to drive sales amid greater competitive pressure and reduced their selling prices further.”


Yesterday the GDP figures for Q1 were announced. The economy contracted by 24% being the worst contraction on record. As the first quarter Apr-June had the worst lockdown periods, going forward as the lockdowns are eased, the festive and government spending are expected to boost consumption and help in revival. RBI has done the much needed but a second round of fiscal stimulus is much needed which will aid in the revival of domestic demand.


*Photo by Robin Sommer on Unsplash

For more details on PMI data Releases visit here