After growing for three straight months, factory output in the country fell in May due to softer demand and slower export.
May PMI stood at a three-month low of 51.6, shows the widely tracked Nikkei purchasing managers’ index (PMI) survey. The 50-point mark separates expansion from contraction, indicating the health of the sector improved to a greater extent, the survey said. PMI had been 52.5 in the past two months of April and March.
Gross domestic product (GDP) figures also showed manufacturing in the slow lane with. During the fourth quarter of 2016-17, manufacturing growth stood at 5.3 per cent, down sharply from 12.7 per cent growth reported in the corresponding quarter of last fiscal.
In the PMI, the manufacturing sector had grown at its fastest pace in five months in March, marking the third straight month of expansion, on strong surge in domestic and export orders.
“The upturn in the Indian manufacturing sector took a step back in May, with softer demand causing slower expansions in output and the amount of new work received by firms. Moreover, there was a renewed decline in new export orders." Pollyanna De Lima, an economist at IHS Markit and author of the report said.
The latest data saw incoming new work rose at the weakest pace since February, with slowdowns evident in the consumer and intermediate goods categories. Capital goods producers, meanwhile, recorded a contraction in order books. Output growth across the manufacturing sector as a whole was at a three-month low.
Businesses further increased their purchasing activity during May. Moreover, the upturn in buying levels was more pronounced than in April. Subsequently, stocks of purchases rose, with the pace of accumulation the quickest in the current
three-month sequence of growth, the report said.
On the other hand, holdings of finished goods decreased in May as companies sought to fulfill orders from stocks. The rate of depletion was sharp, and the most pronounced since August 2015.
Amid reports of the non-replacement of voluntary leavers and shortages of suitable labour, manufacturing jobs in India decreased in May. The fall in staff numbers was centred on the intermediate goods category, with marginal growth noted elsewhere. Manufacturing jobs had risen for the second consecutive month in April, after many months of negative or insignificant growth in job growth.
With regards to outstanding business, accumulation continued for the twelfth straight month.
However, inflationary pressures intensified, with manufacturers seeing purchasing costs go up for the twentieth consecutive month in April mainly for chemicals, metals, paper and plastics.
