Manufacturing sector maintained the momentum in February as Purchasing Managers’ Index (PMI) dropped a tad to 55.3 from 55.4 of January. Though this is 12th successive month of expansion, but job situation was almost stagnant.
PMI is prepared by S&P Global Market Intelligence on the basis of response from purchasing managers of 400 firms. Index above 50 means expansion, while less than 50 means contraction.
Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said that growth momentum in India‘s manufacturing industry was maintained in February, with new orders and output increasing at similar rates to January. Companies were confident in the resiliency of demand and continued to add to their inventories by purchasing additional inputs.
“Job creation failed to gain meaningful traction, however, as firms reportedly had sufficient staff to cope with current requirements. Indeed, there was only a marginal increase in their backlogs. Suppliers also appeared to have ample capacity to accommodate for rising input demand, shown by a stabilisation in delivery times,” she said.
Latest number has come at a time when GDP data for October-December quarter, released on Tuesday, showed manufacturing de-grew for two successive quarters. Though core sector, comprising of key manufacturing sub-segments, jumped 7.8 per cent in January, experts feel overall manufacturing is facing strong headwinds on account of rising interest rate induced demand and export slowdown.
Domestic driven growth
Meanwhile PMI data implied that the domestic market was the main source of new business growth, as new orders from abroad increased only fractionally. The rise in international sales was the weakest in the current 11-month period of expansion. February data pointed to twentieth consecutive rise in manufacturing production. Where growth was reported, panellists mentioned sustained increases in new orders, favourable underlying demand and technological progress. The overall rate of expansion in output was historically sharp and broadly similar to January, it showed.
According to De Lima, the PMI results suggested that most of the upturn in new orders welcomed by firms was domestically driven as international sales rose at a marginal pace that was the weakest in almost a year. “After slipping to a 26-month low last November, input cost inflation surged in every month since. The latest rise was historically subdued, however, and among the weakest in around two years. The survey showed some reluctance among manufacturers to pass on cost increases to clients, with output charge inflation easing since January,” she said.