MANUFACTURING PMI LOSES MOMENTUM
Firms blame Covid curbs, rising input costs
Factory activity lost momentum in August as Covid-induced curbs and rising input costs weighed on demand, forcing firms to put hiring on hold, showed a private survey on Wednesday. IHS Markit purchasing managers’ index (PMI) for manufacturing fell to 52.3 in the month from 55.3 in July.
Factory activity lost momentum in August as Covidinduced curbs and rising input costs weighed on demand, forcing firms to put hiring on hold, showed a private survey on Wednesday, a day after the GDP data showed robust manufacturing growth in the June quarter.
IHS Markit purchasing managers’ index (PMI) for manufacturing fell to 52.3 in the month from 55.3 in July. A reading above 50 indicates expansion and one below that shows contraction. PMI was 48.1 in June. Employment levels were broadly stagnant in August as companies had sufficient staff to cope with current requirements and confidence remained subdued. “Uncertainty regarding growth prospects, spare capacity and efforts to keep a lid on expenses led to a hiring freeze in August, following the first upturn in employment for 16 months in July,” said Pollyanna De Lima, economics associate director at IHS Markit. Business confidence was dampened by concerns surrounding the damaging impact of Covid-19 on demand and firms’ finances.
However, with order books still expanding and businesses retaining optimistic growth projections, stock-building efforts continued and additional materials were bought.
Some firms suggested that favourable market conditions and fruitful advertising boosted demand for their goods. Others noted that sales fell due to the pandemic.
The August data pointed to back-to-back increases in new export orders, but here, too, growth lost momentum. The pace of expansion was only marginal. Indian manufacturers signalled another monthly rise in cost burdens, thereby taking the current stretch of inflation to 13 months. The rate of increase softened, but remained elevated by historical standards.
Manufacturers passed a part of the additional cost burden on to clients by hiking fees. The rate of inflation quickened to a three-month high, but was below that seen for input costs.
Barclays chief India economist Rahul Bajoria said the second consecutive print above 50 suggests the economy is holding forth.
“The details show that the moderation in headline PMI reflected declines in the new export orders and output components, but stocks of finished goods and inventories continue to indicate some space for production gains in the coming months,” he said.