Rising raw material costs and lower order books are expected to affect the growth of the manufacturing sector during the third quarter of the current fiscal, a FICCI survey said today.

“FICCI’s quarterly survey on manufacturing projects continued moderation in growth for the sector. This slowdown is a result of lower order books, moderate export growth and rising raw material costs,” the chamber said in a statement.

Out of 384 companies which participated in the survey, 87 per cent said they expected growth to moderate in the sector in October-December period of 2011-12, compared to the same period last year.

The survey noted that demand conditions have worsened for the manufacturing sector in the third quarter compared to the previous quarters.

Over 65 per cent participants said they are not planning to increase workforce in the next three months, it said.

A significant fall in capacity utilisation is also expected during the quarter, it said, adding that the capacity utilisation levels are particularly low in sectors like textiles, consumer electronics and electricals.

Only 32 per cent respondents said they are planning capacity addition. “In the previous quarter, 41 per cent reported plans for capacity addition in the next six months.”

The survey also said the growth of manufacturing exports are expected to moderate in the third quarter.

Further it stated that sectors which are expected to witness low growth during the quarter include cement, steel, textiles, chemicals, capital goods and electricals.

“The slowdown is a result of moderation in consumer demand, rise in raw material prices and weakening of the export market,” FICCI said.

Output of the manufacturing sector, which constitutes over 75 per cent of the index of industrial production, grew only 2.1 per cent in September, compared to 6.9 per cent expansion in the same month last year.

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