India Manufacturing PMI eases to 15-month low in August

With sales falling in last several month and factories reducing their production and sales, manufacturing activity in India retreated to 15-month low in August as shown by the seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) data. The data pointed out that the manufacturing PMI grew at 51.4 in August, compared to growth of 52.5 in July.

 Although any data above 50 suggests growth in the PMI, however, it was its lowest mark since May 2018, and below its long-run average of 53.9. The survey suggested that even though new  business  continued  to  flow  in,  but  the  rate of  expansion  eased  in August.

 The survey also highlighted that competitive pressures and challenging market conditions restricted the upturn in the month. Furthermore, new orders from global businesses also increased at a slower rate, weakest since April 2018. Output growth was curbed on account of subdued sales to domestic and international clients.

Considering the latest survey results, Pollyanna de Lima, Principal Economist at IHS Markit, said: “Another worrying sign was the first drop in input buying for 15 months, which reflected a mixture of intentional reductions in stocks and shortages of available finance. Until manufacturers are willing to loosen the purse strings, it's difficult to foresee a meaningful rebound in production growth on the horizon.”

The survey statement also mentioned that some survey members reported cashflow problems and a lack of available finance. Well, the finance problem may look better in coming months as the government is taking steps to revive the economy by fresh stimulus through fresh capital infusion into state-run banks, more public spending, liberalizing foreign ownership norms and improving access to credit for businesses. On the other hand, the Reserve Bank of India (RBI) has cut benchmark interest rates four times since January 2019, with the repo rate standing at 5.4% in August.

The weakness in the manufacturing sector in August adds more to the growth concern triggered by the government data released on Friday showing that the India GDP grew at a six-year low of 5% in the June quarter, marking the lowest growth in 25 months.