Manufacturing activity improves slightly in Apr
BENGALURU: Manufacturing activity picked up marginally in April from a six-month low in March as new orders and production expanded at a faster pace despite intensified inflationary pressures due to geopolitical turbulence, a private survey said on Monday.
The S&P Global India Manufacturing Purchasing Managers Index (PMI) improved to 54.7 points in April from 54 points the previous month as the rollback of covid-19 restrictions continued to support demand. The 50-point mark separates expansion from contraction.
However, the agency cautioned that persistent high inflation could affect demand as firms continued to pass on additional cost burden to buyers.
Inflationary pressures intensified in April as input prices rose at the fastest pace in five months, while output charge inflation hit a 12-month high, led by rising commodity prices, the Russia-Ukraine war and greater transportation costs, the report said.
“A major insight from the latest results was an intensification of inflationary pressures, as energy price volatility, global shortages of inputs and the war in Ukraine pushed up purchasing costs. Companies responded to this by hiking their fees to the greatest extent in one year. This escalation of price pressures could dampen demand as firms continue to share additional cost burdens with their clients,” said Pollyanna De Lima, economics associate director at S&P Global.
According to the report, companies reported a further surge in input costs during April, with chemical, electronic component, energy, metal, plastic and textile costs higher than the previous month.
Increases were partly attributed to rising transport fees and the war in Ukraine. The overall rate of inflation strengthened to a five-month high and outpaced its long-run trend, it said.
After 14 price hikes across two weeks in March totalling ₹10 per litre, petrol and diesel prices have remained unchanged for 26 straight days now.
India’s retail inflation measured by the Consumer Price Index (CPI) touched a 17month high of 6.95% in March, and is expected to remain elevated in the coming months, with the impact of high oil and commodity prices trickling down in the economy.
Despite the inflationary pressures, output growth quickened in April and outpaced its longrun average. April data showed a rebound in new export orders, following the first contraction in nine months in March.
In line with the ongoing improvement in demand, firms purchased additional inputs in April. The upturn was sharp and the most pronounced since last November, the report said.
Even as there was an improvement in business confidence during the month, the overall degree of optimism remained subdued by historical standards.
While some firms foresee further improvements in demand and economic conditions, others said the year-ahead outlook was difficult to predict, according to the report.