Factory activity grows for 3rd straight month
NEW DELHI: Manufacturing activities continued to expand for the third straight month in September after a contraction in June, but rising fuel, raw material, and transportation prices pushed the overall rate of input cost inflation to a fivemonth high, IHS Markit India said on Friday.
The seasonally adjusted manufacturing purchasing managers’ index (PMI) rose from 52.3 in August to 53.7 in September, highlighting a stronger expansion in overall business conditions across sectors, the market information provider said in a statement.
A reading above 50 indicates an overall increase compared to the previous month and below 50, an overall decrease. PMI is compiled based on responses from purchasing managers of around 400 manufacturers.
The manufacturing sector’s recovery continued in September as companies benefited from improving demand conditions amid the easing of Covid-19 restrictions. With sales rising at a stronger rate, companies scaled up production and purchased additional inputs, the statement said.
There was also a faster upturn in international sales and an improvement in business confidence. Price pressures, which receded in each of the prior two months, intensified in September due to lingering shortages of raw materials as well as higher fuel and transportation costs, IHS Markit said.
For the September quarter, PMI averaged 53.8, a sizeable improvement from 51.5 in the June quarter, the statement said, adding consumer goods were the brightest spot in September, amid substantial growth of new orders and output. “Indian manufacturers lifted production to a greater extent in September as they geared up for improvements in demand and replenishment of stocks. There was a substantial pick-up in intakes of new work, with some contribution from international markets,” said the statement, quoting Pollyanna De Lima, economics associate director at IHS Markit.
“After subsiding in each of the previous two months, cost inflationary pressures intensified in September,” Lima said. Only a small proportion of this additional cost burden was passed on to clients as seen by a slower and only modest increase in factory gate charges,” the statement said, quoting Lima.
IHS Markit said that anecdotal evidence indicated that demand conditions improved in part due to looser Covid-19 restrictions.
A surge in global commodity prices, including of crude oil and refinery products, is adding to cost pressures of businesses. The monthly average of Indian basket of crude, which was at $66.6 a barrel in April, has firmed up to $74.2 a barrel in August. The price stood at $76.89 a barrel on September 27.
IHS Markit said that companies purchased additional raw materials and semi-finished items in September to accommodate for rising sales and progress with production schedules. The pace of input buying growth was marked in the context of historical data and quickened from August.
Another factor that supported the uptick in input buying was a common view that production would increase in the year ahead. Companies forecast further growth of sales as pandemic-related restrictions continue to ease, IHS Markit said.