Manufacturing PMI climbed to 14 months high of 54.3 in February

Amidst lower estimation for economic growth, a private survey on Friday said that manufacturing expanded at 14 months high rate in February. Result of the survey is expressed as Purchasing Manager Index (PMI) and it touched 54.3 in February as against 53.9 in January.

This index is prepared on the basis of a survey which is conducted among purchasing executives in over 400 companies. These companies are divided into 8 broad categories: Basic Metals, Chemicals & Plastics, Electrical & Optical, Food & Drink, Mechanical Engineering, Textiles & Clothing, Timber & Paper and Transport. Index over 50 shows expansion while below 50 mean contraction. The index is prepared by IHS Markit and released along with a detailed report. This index is widely quoted to explain latest industrial situation and known as Nikkei India Manufacturing PMI.

According to the report, the health of the Indian manufacturing sector strengthened further in February, with a sharp and accelerated increase in sales boosting growth of output and employment. There was a solid rise in input buying and a modest accumulation in preproduction inventories, but stocks of finished goods decreased as firms utilised them to fulfil orders. Rates of both input cost and output charge inflation remained subdued by historical standards, despite picking up from January.

Pollyanna De Lima, Principal Economist at IHS Markit said that the Indian manufacturing sector made further progress midway through the final quarter of FY18, building on the accelerated upturn noted in January. Sharper growth in production and sales were matched by the establishment of new jobs. The upturn in employment was one of the best seen for six-and-a-half years, as goods producers sought to expand output capacities to meet strengthening demand from both domestic and external sources.

“The survey results suggest that manufacturing will likely provide a stronger contribution to overall economic growth in the final quarter, provided that March’s figures stay on this favourable path. For FY19, IHS Markit has revised higher its GDP growth forecast, from 7.0% to 7.1%, amid the announcement of fiscal stimulus for the new interim budget and the policy rate cut announced in February,” she said.

The report further mentioned that supportive government policies and strengthening demand conditions, inflows of new work at Indian goods producers continued to expand during February. The increase was the sixteenth in as many months and the most pronounced since October 2016. Growth of total order books was supported by gains from international sources, as seen by a marked and accelerated upturn in new export work. A number of panellists indicated the acceptance of bulk orders from clients in key export destinations.

Manufacturing output rose at the quickest rate since December 2017, boosted by strong inflows of new business, technological progress, beneficial public policies and positive market conditions. Despite the uptick in production volumes, holdings of finished goods declined again. Moreover, the pace of depletion accelerated from January and was solid overall. Survey members indicated that stocks were utilised to fulfil order requirements, the report said.

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