Indian manufacturing sector registered slowdown in September as Purchasing Managers’ Index (PMI) dropped to three month low to 55.1 as against 56.2 in August. Still, the index is in expansion mode for 15 th month in row. Another good news is that new jobs are being created.
“The latest set of PMI data show us that the Indian manufacturing industry remains in good shape, despite considerable global headwinds and recession fears elsewhere,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said after data released on Monday. The index is formed by S&P Global on the basis of responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. Index above 50 means expansion while below 50 indicates contraction.
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Manufacturing plays key role in providing employment. Based on the responses from panelists, S&P Global said that ongoing increases in new work and efforts to lift production boosted job creation in September. “Employment rose at the quickest pace in three months, albeit one that was slight overall,” it said. Further, it mentioned that despite the uptick in headcounts, companies noted a further increase in outstanding business volumes at the end of the second quarter of this fiscal. That said, backlogs rose at a slight rate that was weaker than in August.
Manufacturing has a share of around 15 per cent in Gross Value Added (GVA).
Limited rise in input costs
Another important factor was cost inflation. De Lima said that businesses also benefited from a notable moderation in price pressures. Input costs rose at the slowest rate in almost two years as suppliers’ stocks improved in line with subdued global demand for raw materials and recession risks. Subsequently, Indian companies sought to restrict selling price hikes and overall inflation eased to a seven-month low, she added.
Expansion at slower pace
Continuous expansion, albeit at slower pace in last couple of months, has also contributed in GST collection which saw a growth of over ₹1.40 lakh crore for seventh successive months. However, companies appear to be bit worried by rupee depreciation which may affect positive environment.
“Once again we saw businesses become more confident in the outlook as inflation worries were tamed. The overall level of positive sentiment seen in September was the best in over seven-and-a-half years. That said, currency risks and the impact of a weaker rupee on inflation and interest rates could derail optimism during October,” De Lima said.