Manufacturing sector output fell in the month of May, its first decline since March 2009, as order flow weakened and power outages affected the sector, a survey said today.
As per HSBC Purchasing Managers’ Index, the economic activities in manufacturing sector continued to remain sluggish last month with output falling for the first time in about four years.
The index, an indicator measuring changes in output, new orders, employment, supplier delivery times and stocks of purchases, fell from 51.0 in April to 50.1 and hit a 50-month low.
“Economic activity in the manufacturing sector slowed further in May as output contracted in response to softer domestic orders. In addition, power outages hampered output and led to a jump in backlogs of work as businesses struggled to meet orders,” said Leif Eskesen, Chief Economist for India & ASEAN at HSBC.
The rise in input costs was, nonetheless, slight and the slowest in the current 50-month inflationary period.
However, growth in export business was solid and the fastest since January.
Order book volumes rose for the 50th consecutive month, the survey said. The rate of expansion was, however, marginal and the slowest in that sequence.
Meanwhile, unfinished business levels increased, amid evidence of power and water shortages. Backlogs of work rose “solidly” and at the quickest pace in five months, it said.
India’s Economic growth rate slipped to a decade low of 5 per cent in 2012-13 on account of poor performance of farm, manufacturing and mining sectors.
“Inflation gauges also eased, and output prices even fell in sequential terms on the back of tougher competition and receding raw material prices. These numbers have heightened the probability that the RBI will fire another salvo at its June policy meeting,” Eskesen added.
A divergence was seen with regard to input and output prices. Whereas purchase prices rose, output charges were lower for the first time in four years.
Companies operating in the Indian goods-producing sector signalled higher staffing levels during May, taking the current sequence of job creation to 15 months. The overall rate of increase remained slight.
Hiring was mainly linked to increased levels of orders placed, but firms also commented on labour shortages.
Buying activity in the Indian manufacturing sector rose during May. The rate of expansion, however, was moderate and the slowest recorded since September 2011.
Suppliers’ delivery times in the domestic manufacturing sector lengthened during May, amid reports of power cuts and strikes.