Manufacturing PMI shrinks for three months straight; job loss still highest on record

Given the sharp rise in cases related to Covid-19 in India, the manufacturing PMI report has highlighted the possibility of a further nationwide lockdown.

In a straight three-month contraction, the manufacturing PMI was 47.2 in the month of June 2020. The fall in the manufacturing activity was primarily driven by sharp contractions in output and new orders, with regional lockdown extensions severely hampering demand conditions, said the IHS Markit report. The deterioration in operating conditions has also been attributed to the fall in new businesses, leading to weak manufacturing activity. However, the downturn in the manufacturing sector in June was less severe than in the previous two months of strict nationwide lockdown. In the month of May, the manufacturing PMI was 30.8 after the historic low level in April.  

Despite easing from May’s level, the rate of workforce contraction remained among the quickest on record. However, the firms remained positive towards the 12-month business outlook, with sentiment strengthening to a four-month high. 

India’s manufacturing sector moved towards stabilisation in June, with both output and new orders contracting at much softer rates than seen in April and May, said Eliot Kerr, Economist at IHS Markit. However, the recent spike in new coronavirus cases and the resulting lockdown extensions have seen demand continue to weaken, Eliot Kerr added.

Also Read: Core industries’ output falls sharply in May; these two industries hit hardest

Will lockdown be imposed again?

Given the sharp rise in cases related to Covid-19 in India, the manufacturing PMI report has highlighted the possibility of a further nationwide lockdown. If the number of cases continues to rise at their current pace, further lockdown extensions may be imposed, which would likely derail a recovery in economic conditions and prolong the woes of those most severely affected by this crisis, Eliot Kerr further said. 

Meanwhile, the core industries’ output in India shrank by 23.4 per cent in the month of May 2020. Earlier in the month of April, the core industries’ output had fallen fell by 37 per cent due to a strict nationwide lockdown. The steepest contraction was seen in the production of steel (48.4 per cent), cement (22.2 per cent), refinery products (21.3 per cent), natural gas (16.8 per cent), electricity (15.6 per cent), coal (14 per cent), and crude oil (7.1 per cent), according to the Department for Promotion of Industry and Internal Trade (DPIIT).