Manufacturing growth slows to 5-month low in March amid weaker demand: PMI

Job generation falls for first time in eight months; GDP growth projection scaled down to 7.3% for FY19

Growth in manufacturing slowed to a five-month low in March, recording the smallest improvement in operating conditions since October 2017, showed the widely-tracked Nikkei purchasing managers’ index (PMI).

The PMI fell to 51 in March from 52.1 in February. A reading above 50 shows expansion. This, coupled with a weak outlook ahead, prompted the compiler of the PMI survey — IHS Markit — to scale down its growth projection from 7.4 per cent to 7.3 per cent for 2018-19. 

The Economic Survey has pegged growth at 7-7.5 per cent for the year, while multilateral agencies have projected it to be 7.2 per cent. With firms’ capacity lying idle, companies have lowered their payroll numbers for the first time in eight months, albeit moderately. Goods manufacturers raised their output for the eighth successive month in March. However, the rate of rise was the weakest since October. 

Whatever higher production occurred is mainly linked to new order growth and favourable demand conditions, the survey pointed out. Growth was reported in all three broad market groups, led by consumption goods. New businesses placed with manufacturing companies rose for the fifth consecutive month in March. Where an increase was registered, firms linked this to improvements in demand in both the domestic and international markets.

That said, the rate of growth eased to the weakest pace in the current sequence, reflecting the slowest gain in new export orders since November. New export orders rose during March, thereby marking a five-month period of growth.  “The impact of US tariffs on steel and aluminium on India is expected to be limited because India’s exports in both metals to the US accounted for less than 0.4 per cent of merchandise exports. On a negative note, further advances in trade disputes could potentially weigh on sales to international clients,” Aashna Dodhia, economist at IHS Markit and author of the report, said. 

While input inflation moderated in March compared to February, the rate of rise in output prices reached an eight-month high. Optimism for the next 12 months remained below the series average even as manufacturing firms retained business confidence. China, with which India is often compared, had better manufacturing performance in March. 

Growth in China’s factory sector picked up more than expected in the month as the authorities lifted production restrictions imposed in winter, a polluting season.