Manufacturing recovery extends to June, but growth eases to 9-month low

K.R. Srivats | Updated on: Jul 01, 2022
Although the latest PMI manufacturing signalled a twelfth consecutive monthly improvement, it was the weakest pace of growth since last September.

Although the latest PMI manufacturing signalled a twelfth consecutive monthly improvement, it was the weakest pace of growth since last September.

India’s June PMI Manufacturing came in at 53.9, lower than 54.6 in May: S&P Global

India’s manufacturing sector activity eased to a nine-month low in June on the back of moderation in total sales and production growth amid intense price pressures, a monthly private survey showed on Friday. 

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) fell to 53.9 in June from 54.6 in May. Although the latest print signalled a twelfth consecutive monthly improvement in the manufacturing sector., it was the weakest pace of growth since last September.

A PMI print above 50 means expansion while a score below 50 denotes contraction.

“The Indian manufacturing industry ended the first quarter of fiscal year 2022/23 on a solid footing, displaying encouraging resilience on the face of acute price pressures, rising interest rates, rupee depreciation and a challenging geopolitical landscape,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

“There was positive news regarding supply chains, with the latest results showing the first shortening of input lead times since the onset of Covid-19. This seemed to have curbed the upward pressure on input costs, with purchase prices and output charges increasing at sharp but slower rates during June. Companies nevertheless remained very concerned about inflation, a key factor that dragged down business confidence to a 27-month low.”

Broadbase slowdown

Lima also highlighted  a broad-based slowdown in growth across a number of measures such as factory orders, production, exports, input buying and employment as clients and businesses restricted spending amid elevated inflation.

Factory orders and production rose for the twelfth straight month in June, but in both cases the rates of expansion eased to nine-month lows. Increases were commonly attributed to stronger client demand, although some survey participants indicated that growth was restricted by acute inflationary pressures, the survey said.

According to the survey, monitored firms reported increase for a wide range of inputs — including chemicals, electronics, energy, metals and textiles — which they partly passed on to clients in the form of higher selling prices.

June data indicated that rates of purchase price and output charge inflation retreated to three-month lows, but remained above their respective long-run averages.

As per the survey, inflation concerns continued to dampen business confidence, with sentiment slipping to a 27-month low. Elsewhere, input delivery times shortened for the first time since the onset of Covid-19.

“Fewer than 4 per cent of panellists forecast output growth in the year ahead, while the vast majority (95 per cent) expect no change from present levels. Inflation was the main concern among goods producers,” the survey said. 

On the job front, employment rose for the fourth successive month, albeit at a slight pace that was broadly in line with those seen over this period.

New export orders rose for the third month running in June. The increase was strong by historical standards, despite easing from May’s 11-year high.

Published on July 01, 2022
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