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Nikkei India Manufacturing PMI slows to 52.1 in September from 52.6 in August

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Posting above the crucial 50.0 threshold for the ninth consecutive month, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI), a composite single-figure indicator of operating performance - highlighted a further improvement in the health of the sector. Down from 52.6 in August to 52.1 in September, however, the latest reading indicated that growth lost some momentum.

India's manufacturing upturn was sustained in September, as a further increase in order books underpinned growth of output and purchasing activity. That said, rates of expansion eased in all cases. One area of strength was external demand, with firms noting the strongest rise in new export orders since July 2015. The latest PMI figures also showed an intensification of inflationary pressures. Both input costs and output charges increased at quicker rates.

 

One factor contributing to the slowdown in the sector was a softer increase in new business inflows. Whereas improved client demand supported the upswing in order books, growth was reportedly hampered by strong competition for new work. Foreign new orders for Indian-manufactured goods expanded markedly in September, and at the quickest rate in 14 months. Panellists commented on successful price negotiations with clients. Greater workplace activity led companies to scale up their buying levels and hire additional workers in September. That said, quantities of purchases rose at the slowest pace since June, while job creation remained marginal overall. Manufacturing output in India continued to increase in September, marking a nine-month sequence of growth. However, the rate of expansion eased since August and was relatively modest.

Amid reports of orders being fulfilled directly from stocks, post-production inventories fell again in September. Conversely, holdings of raw materials and semi-manufactured goods rose for the tenth successive month. Average purchase costs increased at a faster pace in September, but one that was weak compared to its long-run trend. The main item reported to be up in price was steel. Data implied that manufacturers attempted to protect profit margins as output charges were raised further. Despite ticking higher, the rate of inflation was historically muted. Elsewhere, outstanding business volumes increased, while vendor performance deteriorated. Backlogs rose for the fourth straight month, which panellists associated with delayed payments from clients. Suppliers' delivery times, meanwhile, slowed as a result of raw material shortages.

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First Published: Oct 03 2016 | 12:57 PM IST

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