Private sector manufacturing picked up in India in October even as the European and other major economies struggled. The widely tracked HSBC purchasing managers’ index (PMI) for manufacturing in India grew to 52 points in October, from September’s 30-month low of 50.2, on the back of faster expansion in new business. But, the cost of inputs rose substantially in the month.
A reading above 50 indicates expansion and below it denotes contraction.
However, the rise in the manufacturing index could be attributed to augmented demand during the festive season. “The spurt in October PMI, led by a festive season ramp-up in production notwithstanding the slowdown in domestic economic activity, gained further footing in the last one month. It’s corroborated by a tepid pace of IIP expansion at 4.1 per cent in August,” said Shubhada Rao, chief economist, YES Bank.
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Source: Markit Economics
PMI for the euro zone fell to 47.2 points in October, down from 49.1 in September, signalling a second successive monthly contraction of the private sector economy and the fastest rate of decline since July 2009.
The UK’s manufacturing PMI hit a 28-month low at 47.4 points in October as output, new orders and employment declined. Australia saw manufacturing activity continue to decline in October, albeit at a slower pace at 47.4 points.
The October data for China signalled a stronger expansion of manufacturing output as overall new business rose for the first time in three months. PMI for the dragon stood at 51 points in October from 49.9 in the previous month.
Similarly Japan, marred by natural disasters earlier, saw PMI at 50.6 points in October, up from 49.3 in September, signalling a marginal improvement in manufacturing sector operating conditions.
In India, higher raw material and transport costs were the main drivers of the increase in costs, reflected in high output prices.
Output rose at a faster and firmer rate in October, but power outages limited the extent of rise in production leading to marginal accumulation of outstanding business and depletion of finished goods stocks.
But, softening demand in key export countries due to the global economic slowdown slowed the pace of new business orders. October marked a reduction in employment for the third successive month due to increased salary demands from workers, making it difficult to fill vacant positions.
"The Indian manufacturing sector rebounded in October, with rising orders pulling up output. Not surprisingly, input and output prices continued to rise at a rapid pace," said Leif Eskesen, chief economist for India and Asean at HSBC.
It is more or less certain that after eight core sector industries growth declined to 2.3 per cent in September, industrial growth will continue to be sluggish unless the volatile capital goods sector improves dramatically.
The PMI data is based on a survey of about 500 private sector companies and gives a broad indication of economic trends.
