Economy

Manufacturing PMI at the highest since January 2012

Our Bureau New Delhi | Updated on October 01, 2020 Published on October 01, 2020

Factories see increased orders and production amid easing of lockdowns, but employment remains a concern

With increased relaxation of the Covid-led shutdowns, the manufacturing sector gained further momentum in September, as seen in the Purchasing Managers’ Index (PMI). The PMI for September rose to 56.8, against 52 in August. This reading is the highest since January 2012.

 

Manufacturing has a share of around 15 per cent in India’s GDP. Despite the low share, it is seen to employ the most people, directly and indirectly.

The health of the manufacturing sector showed improvement with accelerated increases in new orders and production, said IHS Markit. Also, expansions in export sales and input stocks as well as an improvement in business confidence boosted the sector.

Also read: It's not all gloomy on the economy front

IHS Markit tabulates PMI on the basis of responses from purchasing managers associated with around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month.

 

The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.

Also read: Economy sputters as core sector slips, imports dip, fiscal deficit rises

Many positives

Commenting on the latest survey result, Pollyanna DeLima, Economics Associate Director at IHS Markit, said the Indian manufacturing industry continued to move in the right direction, with PMI data for September highlighting many positives. Due to loosened Covid-19 restrictions, factories went full steam ahead for production, supported by a surge in new work.

Exports also bounced back, following six successive months of contraction, while inputs were purchased at a sharper rate and business confidence strengthened. One area that lagged behind, however, was employment.

Employment woes

Some companies reported difficulties in hiring workers, while others suggested that staff numbers had been kept to a minimum amid efforts to observe social distancing guidelines. "When we look at the PMI average for the second quarter of fiscal year 2020-21, the result is in stark contrast to that seen in the first quarter: a rise from 35.1 to 51.6. While uncertainty about the pandemic remains, producers can at least for now enjoy the recovery," said DeLima.

Also read: Rough road ahead for auto sector

Amid reports of restriction relaxations and higher demand, Indian manufacturers lifted output for the second straight month in September. The increase was sharp and the third-quickest in the history of the survey. Similarly, there were back-to-back increases in new business inflows. The rate of expansion picked up to the fastest since early-2012.

The upturn in total sales was supported by a renewed expansion in new export orders, the first since the escalation of the Covid-19 outbreak. Despite strong growth of order book volumes, Indian goods producers signalled another reduction in payroll numbers. In many cases, this was attributed to efforts to observe social distancing guidelines. Employment has now decreased for six consecutive months.

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Published on October 01, 2020
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