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The HSBC Purchasing Managers Index (PMI) for manufacturing has slipped to 52.9 in the month of January from a two-year record high of 54.5 in December.Still, there is improvement in the business conditions though more slowly than in the previous month .
The PMI is a measure of factory production and based on data compiled from monthly replies to questionnaires sent to purchasing executives in and around 500 manufacturing companies. Index above 50 shows expansion, while below 50 indicates decline .
"Manufacturing activity continued to signal improvement in January, though the rate of growth slipped to a three-month low. The slip can partly be attributed to consolidation after two months of impressive upticks. New orders, both from domestic and international sources, also continued to grow, though at a slower pace than in December,” Pranjul Bhandari, Chief India Economist at HSBC, said.
He also mentioned that new orders were strongest in the consumer goods sector. On the inflation front, growth in input and output prices moderated further due to cheaper commodity prices.
“Sluggish growth and falling inflation further reinforces our view that the RBI should deliver upfront rate cuts. We expect the repo rate to be lowered by 75 bps (basis points, 100 basis points mean 1 per cent) in the first half of 2015,” he added.
Output growth
The survey found that the overall improvement in the Indian manufacturing sector was underlined by further output growth in January. Production rose at a robust pace, extending the current sequence of expansion to 15 months.
Amid reports of improving demand, latest data indicated that new orders increased for the 15th successive month in January, albeit at a slower rate than seen in December.
Jobs growth
Talking about jobs, the survey said that the growth of output and new businesses continued to have little impact on employment in January, as workforce numbers rose only marginally during the month.
Concurrently, backlogs of work rose at the fastest rate in a year, with some companies commenting on capacity pressures being applied by rising order book volumes. Higher new work intakes and subsequent production requirements also led to a further rise in purchasing activity at the start of 2015, it mentioned.
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