India’s manufacturing sector growth lost momentum in November, but the latest Purchasing Managers’ Index (PMI) reading at 56.3 was still consistent with sharp rate of expansion, the IHS Markit India Manufacturing PMI revealed.

The reading was lower than 58.9 in October, which was a decadal high. In September, the manufacturing PMI was at 56.8 (which was highest since January 2012).

While the latest PMI highlighted a strong improvement in business conditions, there were slower increase in factory orders, exports, buying levels and output. Meanwhile, Covid-19 restrictions caused a further drop in payroll numbers, input costs and output charges rose at accelerated rates that have nevertheless remained below their respective long run averages.

All the three broad areas of the manufacturing industry recorded expansion, with growth led by consumer goods which was the only sector to see a stronger rate of increase.

Path to recovery

Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said: “The Indian manufacturing sector remained on the right path to recovery, with strong growth of new orders and output sustained during November. Although the softening of rates of expansion seen in the latest month does not represent a major setback, since these are down from over decade highs in October, a spike in Covid-19 cases and the possibility of associated restrictions could undermine the recovery.

“Companies noted that the pandemic was the key factor weighing on growth during November, with Covid- related uncertainty also restricting business confidence.

“For now, firms are projecting sustained demand growth in the near-term and responded to this by lifting input buying to increase their safety stocks. Employment remained in contraction territory, however, with companies reportedly keeping the minimum possible number of workers as per government guidelines.”

The IHS Markit survey showed that aggregate new orders rose at the slowest pace in three months. However, the upturn was sharp and stronger than any seen for eight years prior to September. Companies indicated that sales growth was underpinned by resilient demand, though curbed by the pandemic.

Export orders

New export orders increased markedly in November, with survey participants reporting strong demand for their goods from key export markets. However, the pace of expansion eased from October's high.

The loosening of Covid-19 restrictions, combined with an improvement in market conditions and a pick-up in demand supported an increase in production. Although the slowest for three months, the rate of expansion in output was sharp and outpaced its long-run average, the survey revealed.

Employment, on the other hand, decreased again as companies observed social distancing guidelines. The rate of job shedding was solid and little-changed from October. Subsequently, firms noted another increase in outstanding business during November.

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