Factory activity slips to 5-month low in March

Lacklustre orders, slower hiring hurt manufacturing

India's manufacturing sector activity fell to a fivemonth low in March, as new business orders rose at a slower pace, and firms showed little appetite for recruitment, says a monthly survey.

The Nikkei India Manufacturing Purchasing Managers Index (PMI), fell from 52.1 in February to a fivemonth low of 51 in March, indicating the slowest improvement in operating conditions recorded by the survey since last October.

This is the eighth consecutive month that the index remained above the 50-pointmark. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

"India's manufacturing sector continued to grow, albeit at the weakest pace since October, reflecting weaker gains in new business and a decline in employment for the first time in eight months," said Aashna Dodhia, Economist at IHS Markit and author of the report.

Dodhia noted that the impact of US tariffs on steel and aluminium on India is expected to be limited, as India's exports in both metals to the US accounted for less than 0.4 per cent of total merchandise exports.

Though new export orders rose during March, Dodhia said, "On a negative note, further advances in trade disputes could potentially weigh on sales to international clients".

On the employment front, firms reduced their payroll numbers for the first time in eight months, albeit at a fractional pace. “PMI employment data gave warning signs in the labour market," Dodhia said, adding that "manufacturers operating in consumption and intermediate market groups signalled no appetite for recruitment".

Meanwhile, business sentiment remained weak, reflecting some concerns regarding business prospects over the next 12 months.

"Indeed, amid a slower expected pace of recovery in consumer spending, IHS Markit marginally downgraded its real GDP forecast to 7.3 per cent for fiscal year 2017-2018," Dodhia said.

On the prices front, the survey noted that the recent "build-up of inflationary pressures eased in March, with softer increases in both input costs and output prices recorded".