Economy

Manufacturing PMI dips to 51.8 in March

Shishir Sinha New Delhi | Updated on April 02, 2020 Published on April 02, 2020

File Photo   -  Reuters

The sector saw a record decline in new export orders, with international demand faltering amid the Covid-19 outbreak.

Amidst contraction in local and global demand along with supply, India’s manufacturing sector expanded at slowest pace for four months in March. Accordingly, Purchasing Managers’ Index (PMI) slipped to 51.8 in March as against 54.5 in February.

PMI is widely quoted by policy makers and is used as a key tool in decision making by the government and regulatory authority all over the world. This index is based on survey conducted and compiled by IHS Markit.

Survey seeks responses from purchase managers belonging to manufacturers. 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. The indices are then seasonally adjusted. The headline figure is the Purchasing Managers’ Index.

Commenting on latest PMI number, Eliot Kerr, Economist at IHS Markit, said the Indian manufacturing sector remained relatively sheltered from the negative impact of the global coronavirus outbreak in March, however, there were pockets of disruption and a clear onset of fear amongst firms. New orders and output both grew at softer rates, but those readings were relatively tame compared to those seen at goods producers in Europe and other parts of Asia.

The most prominent signs of trouble came from the new export orders and future activity indices, which respectively indicated tumbling global demand and softening domestic confidence.

"Should the trajectory of injections continue in the same vein, the Indian manufacturing sector can expect a much sharper negative impact in the coming months, similar to the scale seen in other countries," he said.

Manufacturing is key to Indian economy as it provides maximum employment, directly or indirectly. It has share of 16.7 per cent in GDP (Gross Domestic Product).

Report accompanying PMI explained the business conditions in the manufacturing sector improved at the slowest rate for four months in March, hampered by softer rises in both output and new business.

Contributing to the downward momentum was a record decline in new export orders, with international demand faltering amid the Covid-19 outbreak. There was also evidence that the virus negatively impacted the supply-side of the sector, as suppliers' delivery time lengthened for the first time in five months.

Supply distruption

Signs of supply-side disruption crept into the Indian manufacturing sector in March, with vendor performance deteriorating for the first time since last October.

Anecdotal evidence suggested that delays were caused due to shortage at some suppliers. However, the lengthening of average lead times was only slight overall. Manufacturing firms continued to increase their staff numbers in March, but the pace of hiring remained subdued.

The rate of workforce expansion was unchanged from February's recent low, the report mentioned.

 

Published on April 02, 2020

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