 "Manufacturing PMI falls to 9-month low in September")
Growth in manufacturing activities slowed to a nine-month low in September, as the pace of new orders declined, showed a widely-tracked HSBC Purchasing Managers' Index (PMI).
PMI was down to 51 points in September from 52.4 in August. The September score was the lowest since December 2013. Still, it represents growth in manufacturing, as a score above 50 points represents expansion.
Orders of some commodities might have been put on hold for a fortnight due to Pitra Paksh, when auspicious purchases are rarely done. If PMI remains subdued in the next month of Diwali as well, then it would indicate that revival of manufacturing might take a bit longer.
As demand loses steam, inflationary pressures from both input and output sides showed a deceleration. The data came a day after the Reserve Bank of India (RBI) kept its repo rate intact to rein in inflation.
Frederic Neumann, co-head of Asian Economic Research at HSBC and commentator of PMI India surveys, however, wanted RBI to keep rates elevated to check entrenched inflationary expectations.
“The central bank is likely to look beyond the near-term moderation and keep policy rates elevated so as to rein in entrenched inflation expectations,” he said.
RBI would rather see growth recover supported by supply-side reforms than through monetary policy stimulus, he said, even as industry chambers wanted the central bank to lower rates to give manufacturing a boost.
New orders rose for the 11th month in running in September but the rate of growth was weakest in these months. Growth was witnessed across sectors but the steepest rise was seen in capital goods sector. If so, this would be quite a contrast from the latest official data. In the Index of Industrial Production (IIP), capital goods output declined 3.8 per cent in July.
PMI was down to 51 points in September from 52.4 in August. The September score was the lowest since December 2013. Still, it represents growth in manufacturing, as a score above 50 points represents expansion.
Orders of some commodities might have been put on hold for a fortnight due to Pitra Paksh, when auspicious purchases are rarely done. If PMI remains subdued in the next month of Diwali as well, then it would indicate that revival of manufacturing might take a bit longer.
As demand loses steam, inflationary pressures from both input and output sides showed a deceleration. The data came a day after the Reserve Bank of India (RBI) kept its repo rate intact to rein in inflation.
Frederic Neumann, co-head of Asian Economic Research at HSBC and commentator of PMI India surveys, however, wanted RBI to keep rates elevated to check entrenched inflationary expectations.
“The central bank is likely to look beyond the near-term moderation and keep policy rates elevated so as to rein in entrenched inflation expectations,” he said.
RBI would rather see growth recover supported by supply-side reforms than through monetary policy stimulus, he said, even as industry chambers wanted the central bank to lower rates to give manufacturing a boost.
New orders rose for the 11th month in running in September but the rate of growth was weakest in these months. Growth was witnessed across sectors but the steepest rise was seen in capital goods sector. If so, this would be quite a contrast from the latest official data. In the Index of Industrial Production (IIP), capital goods output declined 3.8 per cent in July.
However, manufacturers saw new business from abroad grow at an accelerated pace in September. Respondents to the survey pointed to strengthening demand from key export clients. This might mark a pleasant surprise since the biggest India’s export partner — European Union — has been facing slowing growth.
If reflected in official data, this might mean better merchandise export numbers after the growth declined to the lowest in five months in August.
Marked expansions in foreign orders were reported in the consumer and intermediate goods sub-sectors, while exports fell for producers of investment goods.
Job numbers remained broadly stable in September, as the vast majority of survey respondents signalled no change in staffing levels. Among the monitored sub-sectors, job losses in consumer and investment goods were offset by marginal job creation at intermediate goods companies.