Manufacturing rebounds with PMI at 6-month high

Increase in orders saw a rebound in the manufacturing sector with the Nikkei India Purchasing Manager Index rising to 52.7 in July, a six-month high, from 51.3 in June.

The index, prepared on the basis of a survey, revealed that a solid and accelerated increase in new orders led firms to raise production. Moreover, growth of both domestic and foreign demand was reported, with new business from abroad rising at the quickest rate since February, it said.

Commenting on the new number, Pollyanna De Lima, Economist at Markit and author of the report, said that though the latest data suggests that the manufacturing upturn gained traction, worries regarding the labour market persist.

Job worries Continued job shedding highlights the concern felt by businesses towards the outlook, with firms failing to increase workforce numbers significantly since early 2014, she said.

“In spite of a further rise in costs, efforts to address competitiveness were evident as selling prices were unchanged during July. Cost inflation was, however, weak in the context of historical data. While this is a generally positive set of data, the upcoming PMI data releases will indicate whether the manufacturing sector can sustain this momentum,” she said.

However, the survey also found that despite the uptick in growth, Indian manufacturers continued to cut workforce numbers in July. Nonetheless, the rate of job shedding was only marginal as around 96 per cent of those surveyed reported no change in employment from the levels recorded in the prior month. Purchase prices rose further in July, it said.

Selling prices were unchanged on average, with companies highlighting efforts to secure new business. Growth of new export business accelerated in July and was the most pronounced in five months. They also reported having been able to secure new contracts in tandem with successful price negotiations with clients. There was evidence of building pressures on the capacity of Indian manufacturers’ operations, as outstanding business was accumulated for the second month running and at the quickest pace since March.

The new data are based on responses of purchasing executives in over 300 industrial companies.

The manufacturing sector is divided into eight broad categories: Basic Metals, Chemicals and Plastics, Electrical and Optical, Food and Drink, Mechanical Engineering, Textiles and Clothing, Timber and Paper and Transport.

Index over 50 reflects expansion, while below 50 reflects a contraction.