March factory PMI plummets

The PMI dropped to 51.3 due to weaker growth in output and new orders, among other factors

Expansion in the manufacturing sector moderated in March, after a year-high growth in the previous month, showed the HSBC Purchasing Managers’ Index (PMI) data on Tuesday.

Manufacturing PMI dipped to 51.3 points in March from 52.7 points in February, when it was at a year-high, indicating moderate growth. A PMI reading above 50 shows expansion while one below 50 indicates contraction.

This data comes a day after official estimates showed the eight infrastructure sectors grew at a five-month high of 4.5 per cent in February against 1.6 per cent in the previous month.

According to Markit Economics, a financial firm compiling data, the PMI dropped lower due to weaker growth in output and new orders, among other factors.

“The momentum in the manufacturing sector eased on the back of a slowdown in order flows and raw material shortages,” said Leif Eskesen, chief economist for India and Asean at HSBC.

However, in the fourth quarter, the average growth was the highest since the same period last year.

Notably, the survey participants reported increased competition for new work, leading to lower expansion and also, the fact that “the elections had weighed on growth”.

Month	PMI manufacturing
Mar-13	52.0
Apr-13	51.0
May-13	50.1
Jun-13	50.3
Jul-13	50.1
Aug-13	48.5
Sep-13	49.6
Oct-13	49.6
Nov-13	51.3
Dec-13	50.7
Jan-14	51.4
Feb-14	52.5
Mar-14	51.3
* The reading is in points; above 50 indicates expansion, that below 50 signals contraction
Source: Markit Economics

In India, the general elections will commence from April 7 and continue till May 12.

New export orders rose for the sixth consecutive month and there were evidences of improved demand conditions in key export markets.

The signs of economic recovery could only be foreseen after the elections, experts noted.

“While we might see traction on economic reform and execution of investment projects after the upcoming elections, the recovery in growth is likely to prove protracted,” said Eskesen, who also said that the growth will remain moderate in coming months due to fiscal tightening, relatively high corporate leverage, and rising non-performing loans in the banking system.

The inflationary burden eased in March, as input costs increased at the weakest rate in nine months and output prices also rose at the slowest pace since June, the survey noted.

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