New Delhi: India’s manufacturing sector activity slumped to a nine-month low in June as growth of total sales and production moderated amid intense price pressures, a monthly survey said on Friday, July 1.
The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) fell to 53.9 in June from 54.6 in May, the weakest pace of growth since last September. In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction.
The June PMI data pointed to an improvement in overall operating conditions for the twelfth straight month.
“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.
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.
Lima further explained that there was 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.
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% of panelists forecast output growth in the year ahead, while the vast majority (95%) 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.
Meanwhile, the RBI, in its financial stability report released on Thursday said that persistently high inflation globally is to stay here longer than anticipated as the ongoing war and sanctions take toll on economies, threatening a further slowdown to global trade volume.
The global economic outlook is clouded by the ongoing war in Europe and the pace of monetary policy tightening by central banks in response to mounting inflationary pressures, the RBI report said.
Nevertheless, the global index is at a 2-month high of 51.5 and taking a promising trajectory.