Factory output declines to nine-month low in June

BENGALURU: India’s manufacturing sector’s growth slumped to a nine-month low in June as high inflation crimped demand for new orders and production, showed a private survey on Friday, indicating that a full economic recovery would take longer than expected.

Inflationary concerns fuelled by global geopolitical tensions also dampened business sentiment, which slipped to a 27-month low in the previous month. The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) declined to 53.9 points in June from 54.6 points in May as growth was restricted by acute inflationary pressures, even as the sector continued to post economic recovery led by robust domestic and international demand.

It was the 12th straight month of growth. The latest rise was the slowest in three months.

Growth in production, factory orders, stocks of purchases, and employment slowed in June.

“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….yet, there was a broadbased 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,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

However, on the brighter side, the input delivery times shortened for the first time since the onset of the pandemic.

“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,” said De Lima.

New export orders rose for the third straight month in June, but lower than the 11-year high posted in May. Employment rose for the fourth successive month, albeit at a slight pace that was broadly in line with those seen over this period. Job creation restricted backlog growth, which increased at the slowest pace in three months.