OUTPUT BOOST
Growth in manufacturing activity eased a bit in February compared to the previous month but it remained at an elevated level, showed a widely-tracked survey on IHS purchasing managers’ index (PMI).
PMI inched down to 57.5 in February from 57.7 in January. In PMI parlance, a reading above 50 is growth and below it is contraction.
Although easing from January, the pace of growth remained sharp in the context of historical data, said a commentary associated with the release of data.
The headline figure in February remained above its long-run average of 53.6.
Even after growth more or less remained at a high level, employment decreased further amid Covid-19 restrictions related to shift work.
On the other hand, strengthening demand for raw materials and semi-finished items exerted upward pressure on input cost inflation, which was up to a 32-month high.
Factory gate charges also rose, albeit at a modest and softer pace. Robust demand for inputs prompted suppliers to hike their fees. Survey noted higher prices for a number of items such as chemicals, metals, plastics and textiles.
Better demand conditions and successful marketing campaigns reportedly underpinned a further increase in new orders in February.
Data showed a rise in pre-production inventories in February, the sharpest monthly growth in the survey’s history. However, post-production stocks fell sharply as companies attempted to deliver purchased goods in a timely manner.
Pollyanna De Lima, economics associate director at IHS Markit, said, “Still, data indicated that production growth could have been stronger in case firms have appropriate resources to handle their workloads.”
In GDP data, manufacturing came out of contraction — seen in the four consecutive quarters — by posting a moderate 1.6 per cent growth in the third quarter of 2020-21.
New export orders also rose halfway through the final quarter of the fiscal year, albeit at a modest rate that was softer than in January.
According to panel members, the Covid-19 pandemic restricted international demand for Indian goods.
Official trade data revealed that merchandise exports rose at a hefty pace of 6.16 per cent in January against a marginal 0.14 per cent in December. Most months in 2020 saw contraction in goods exports.
Goods producers expect output to increase over the coming 12 months, with the overall level of positive sentiment matching that of January.