India’s factory activity falls to 10-month low

NEW DELHI: Manufacturing activity dropped to its lowest in 10 months in May, barely managing to stay in the expansion zone, as the second wave of the pandemic triggered state-wide lockdowns and forced producers to reduce inventory amid damaged consumer sentiment.

Data released by data analytics firm IHS Markit on Tuesday showed manufacturing purchasing managers’ index (PMI) fell to 50.8 in May from 55.5 in April. A figure above 50 indicates expansion, while sub-50 signals contraction.

Pollyanna De Lima, economics associate director at IHS Markit, said the manufacturing sector is showing increasing signs of strain as the Covid crisis intensifies.

“Key gauges of current sales, production and input buying weakened noticeably in May and pointed to the lowest rates of increase in 10 months. In fact, all indices were down from April. Growth projections were revised lower as firms became more worried about the escalation of the pandemic and local restrictions,” she added.

Industry lobby Ficci said in its latest quarterly survey on Monday that business confidence of companies dipped to its lowest in three quarters in

May after posting a decadal high in the previous survey as the second wave hit.

The data analytics firm said the firms that were successful in securing new work during May purchased additional materials for use in the production process.

“However, others refrained from lifting input buying due to fewer output needs and the Covid crisis,” it added.

May data continued to signal lengthening supplier delivery times, with vendor performance worsening for the third month. “The deterioration was linked to ag lobal shortages of raw material and the Covid pandemic. Although new export orders also increased at a softer rate, the upturn was solid and outpaced the long-run series trend,” the analytics firm said. Raw material scarcity exerted upward pressure on input costs. “The rate of inflation eased to a four-month low but remained above its long-run average. Panellists reported higher aluminium, chemical and copper prices,” IHS Markit said.

An indicator by Quanteco Research called Daily Activity and Recovery Tracker (DART) Index rose for the first time in 12 weeks in the week ended May 30, led by improvements in mobility indicators and railway passenger movement.