Manufacturing index at 9-mth low.
India’s economic report card continued to give mixed signals, according to HSBC Purchasing Managers Index (PMI). While the services sector performed marginally better with a PMI of 56.1 points in June from 55 in May, the manufacturing sector’s index was at a nine-month low at 55.3 points.
Dragged down by manufacturing, the composite index, comprising both the secondary sector and services, was down to a nine-month low of 56.8 points in June.
The PMI surveys 500 private businesses in a respective sector during a reference period for every month, where 50 points denote flat growth, over 50 points represents expansion, while below 50 shows contraction.
A statement by Markit Economics, a financial information firm which compiles PMI, said a marginally faster expansion in the services sector was not sufficient to offset a slowdown in the rate of output growth at the manufacturing level. Manufacturing was hampered by a marginal rise in new orders as well as labour shortages and power cuts, the report said.
The sharp contrast in services and manufacturing could also be gauged from the fact that new businesses received by the tertiary sector reported a sharp increase, while new orders for manufacturing slowed to the weakest in six months.
The data also revealed that Indian service companies remained optimistic of hightened activity levels for the next 12 months. Panelists said they expected improvements in general economic conditions and increased marketing initiatives to support a rise in new business and activity in the services sector.
Leif Eskesen, chief economist for India & ASEAN at HSBC said: “Services are showing signs of resilience, with business activity and new business improving over the previous month, despite policy tightening and high inflation. While input costs and prices charged grew at a slightly slower pace, inflation pressures remain significant and persistent. The RBI, therefore, has little choice but to continue its tightening cycle.”
The Reserve Bank of India has already raised policy rates 10 times since early 2010 to tame inflation, which still stands at over nine per cent despite the central bank initiatives.
