Demand dip slows manufacturing to nine-month low in September

Shishir Sinha New Delhi | Updated on March 12, 2018 Published on October 01, 2014



Manufacturing sector activity in September grew at its slowest pace in nine months due to weaker output because of tepid domestic demand. This is even as the operating conditions improved for the ninth month in a row.

HSBC’s Purchasing Manager Index (PMI) dropping to a nine-month low of 51 in September comes close on heels of the Government announcing the ‘Make in India’ campaign to turn the country into the factory for the world.

“Manufacturing activity continues to slow amid weaker output and new order flows. Responding to the slowdown, firms lowered purchases and trimmed inventories,” said Fredric Naumann, Co-Head of Asian Economic Research at HSBC. On the positive side, he added that the rate of cost inflation decelerated sharply and output prices were unchanged.

According to the HSBC survey, exports have picked up. It said that the operating condition has improved for the eleventh month in succession.

The PMI is a measure of factory production and is based on data compiled from replies to questionnaires sent to purchasing executives every month in around 500 manufacturing companies. An index above 50 shows expansion, while below 50 indicates a contraction.

Rohini Malkani, Economist with Citigroup India, said that while there is cyclical and sentiment boost, the road to recovery will be far from smooth.

“Going forward, we see a steady improvement in both investment demand on Government efforts (PMG or Project Management Group initiatives, Make in India campaign, environmental clearances) and consumption demand (festival season), and thus maintain our fiscal 2015 GDP estimate of 5.6 per cent,” she said.

Sonal Varma and Aman Mohunta of Nomura said that PMI data indicate some moderation in domestic demand in September after the sharp rise during the May-August period.

Published on October 01, 2014
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