The country’s manufacturing growth moderated in June after registering a 27-month increase in the previous month, as order flow eased, a survey said today.
The HSBC Purchasing Manager’s Index (PMI), a headline index designed to measure the overall health of the manufacturing sector, slipped to 57.3 in June from 59 in May.
A reading of above 50 indicates a gain in factory production, though the gain in June has been slower than the previous month. However, the latest reading remained above the series average indicating that consumer demand in India continues to be robust.
“India’s economy is stepping back a little, with output growth easing into June. This has reduced price pressures a little, with both input and output components signalling deceleration in inflation,” said Frederic Neumann, co-head of Asian Economics Research at HSBC.
Inflationary pressures moderated in June, sharply in the case of input prices (the respective index dropped by over 10 points since May). As a result, purchasing costs rose at the slowest pace for a year. In the 15 per cent of cases where input prices increased, panelists mentioned higher raw material and fuel costs.
Factory gate prices rose modestly and at the weakest rate since February. Even as price pressures slowed during the month, expectations are high that the recent increase in fuel prices might add to inflation in the coming month.
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Reports suggested that favourable economic conditions and good company reputations had supported demand during June. Although the growth in new export orders accelerated since May, the domestic demand was the major contributor to the growth in new orders.
In the month, backlogs of work accumulated significantly which panel members linked to delays due to power cuts.
Despite a faster build-up of unfinished work, manufacturers did not add to payrolls during the survey period. Overall employment levels were unchanged, with the vast majority of companies (approximately 96 per cent) maintaining staffing numbers on the month.
Input acquisitions made by Indian manufacturers rose for the 15th month running in June. Respondents stated that higher buying activity reflected greater workloads and efforts to rebuild pre-production inventories.