NEW DELHI: Growth in the country’s manufacturing sector slowed to a three-month low in January due to the impact of easing orders and power outages, a survey showed on Friday.
The HSBC Purchasing Managers’ Index (PMI) – an indicator aimed at providing a snapshot of operating conditions in the manufacturing sector – posted 53.2 in January, down from 54.7 in December. The December reading was a six-month high on the back of solid orders. The latest reading signalled a further improvement in the health of the Indian manufacturing sector.
But the improvement was slower, the survey said. The Indian manufacturing sector has been hit hard by the slowing economy, weakening global growth, high interest rates, stubborn inflation and rising input costs. Continuing the trend that started in April 2009, output at manufacturers in India rose during January.
While solid, the rise in production was the slowest recorded in three months amid evidence from the survey panel that ongoing issues with the supply of power had restricted growth, according to the PMI survey. “The growth momentum in the manufacturing sector eased in January as a slower expansion in new orders and power outages slowed output growth,” said Leif Eskesen, chief economist for India & Asean at HSBC. “To meet new orders, manufacturers still rely on a draw down in stocks of finished goods, which should provide support for output growth in coming months as stocks are replenished,” Eskesen said.
The survey said input and output prices both increased in January, with rates of inflation again marked. Input costs rose for the forty-sixth successive month, with respondents indicating that fuel and raw material prices had increased.
Output charges were raised to protect margins in the face of higher costs, it said. “Encouragingly, input and output price inflation continued to ease, albeit only gradually, supporting the case for RBI’s cautious policy rate cut earlier this week,” Eskesen said. The RBI has reduced the repo rate and the cash reserve ratio to help support growth but has cautioned about the inflationary pressures prevalent in the economy. The volume of incoming new work expanded in January, the forty-sixth consecutive monthly increase recorded.
Over one-fifth of the survey panel indicated higher levels of new orders, citing stronger demand and maintained product quality. Total new business rose solidly, although growth eased from December. New export orders increased for the fifth consecutive month, and also at a solid rate.
Panel members stated that demand from foreign clients was higher. In line with stronger sales, manufacturers in India increased their input buying in January. The overall rate of growth, although solid, eased to a three-month low.
The survey showed staffing levels in the manufacturing sector increased during January, amid reports of higher workloads but the pace of job creation was slight and unchanged from December.