MANUFACTURING PMI RISES IN APRIL FROM FIVE-MONTH LOW

After robust GST collection numbers, the purchasing managers index (PMI) for manufacturing showed that the economy is gradually

recovering. Growth in manufacturing picked up in April as PMI rose to 51.6 from a five-month low of 51 in March. A reading above 50 shows expansion. Overall, manufacturing conditions improved for the ninth consecutive month in April, the report said. Also, after lowering their payroll numbers in March for the first time in eight months, companies managed marginal job creation in April.

After goods and services tax (GST) collection numbers, purchasing managers’ index (PMI) for manufacturing showed that the economy is gradually recovering. Growth in manufacturing picked up in April, raising hope of quicker recovery for the sector from the slow growth recorded for March.

PMI rose to 51.6 in April from March’s fivemonth low of 51. A reading above 50 shows expansion. Overall, manufacturing conditions improved for a ninth consecutive month in April, the PMI report said.

Also, after lowering their payroll numbers in March for the first time in eight months, companies managed marginal job creation in April.

On Tuesday, the government data showed that GST collections crossed the ~1 trillion-mark in April. This had prompted Finance Minister Arun Jaitley to say that the collections reflect upswing in the economy as indicated by other reports. So far, only GST and PMI for manufacturing numbers have come in for

April, which somewhat corroborate what the FM had said.

However, a definite trend will have to be watched for few more months, besides PMI for services, to gauge any firm economic revival. Also, PMI for manufacturing in April was not as high as in February. The GST numbers were also a bit of an exception in April.

The index of industrial production (IIP) data that will come on May 12 will be for March. Also, GDP data, slated to be released this month-end, will also be for the previous financial year.

Greater output in consumption and intermediate groups outweighed the decline in investment goods, said the survey. Goods manufacturers raised output for a ninth successive month in April; the rate of rise gained pace. Also, the rise of new order growth and favourable demand conditions showed strengthening. New business rose for a sixth month. Although modest, the rate of expansion accelerated, with firms saying stronger market demand had led to greater client wins.

That said, the rate of growth eased to the weakest pace since November 2017, reflecting the slowest gain in new export orders since then. New export orders had risen in March, marking a six-month period of growth. IHS Markit, the report’s issuer, had earlier warned that more of trade disputes could weigh on sales to international clients.

On the price side, Indian manufacturers faced higher input costs during April, extending the period of inflation to just over two-and-a-half years. Although solid, input cost inflation moderated for a second month in a row to the weakest since last September. However, to survive in a tough market, firms raised their selling prices at the weakest rate in nine months. “Encouragingly, input cost and output charge inflation were at the weakest since September 2017 and July 2017, respectively,” said Aashna Dodhia, economist at IHS Markit and author of the report.

Finally, business sentiment was strongest since implementation of the GST in July 2017. The optimism reflected expectations that new business and demand conditions would improve over the coming 12 months, according to companies in the survey.

After a marginal decline in March, pending work rose during April due to delayed payment from clients, among other reasons. As a result, pre-production stocks rose at the fastest pace in 2018 so far, while inventories of finished goods were depleted at the jointly fastest rate in the survey history.

China, with which India is often compared, continued to hit blocks in its April manufacturing performance. Growth in China’s factory sector slowed as export orders dried, with the continuing trade war with the US. Companies in China cut output, fearing industrial risk as a result of slower orders and high corporate debt.