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India manufacturing PMI declines marginally in August due to fall in output

Monday, 1 September 2014 - 2:47pm IST | Place: Mumbai | Agency: PTI

After a sharp upswing in July, India's manufacturing sector activity declined marginally in August owing to a fall in output and new domestic orders, an HSBC survey said today. The HSBC India Manufacturing Purchasing Managers' Index (PMI), a measure of factory production, eased to 52.4 in August from 53 in July, registering a moderation in manufacturing activity, though remaining "solid". This is the 10th consecutive monthly improvement in operating conditions in August.

A PMI reading above 50 indicates growth while a lower reading means contraction. "Manufacturing activity moderated following a spurt in the previous month. Output and new orders slowed slightly in August, but remained robust relative to their 12-month history," HSBC Co-Head of Asian Economic Research Frederic Neumann said. The slowdown during August looked to be domestically -driven since new export orders (54.5 as against 54.3 in July) registered a marginal rise.

"New export orders rose in August, extending the current sequence of growth to 11 months. Surveyed firms pointed to strengthening demand from key export clients as the main reason behind expansions in foreign business," HSBC said. Details within the survey suggest that growth in August was driven mainly by consumer goods, whereas capital goods production suffered during the month. Conversely, workforce numbers declined for a second successive month in August, albeit at a fractional rate, as the vast majority of survey respondents left recruitment levels unchanged. On inflation, HSBC said that price pressures remained elevated despite the slight deceleration seen in input prices.

"This is likely to keep the central bank guarded against inflation risks, particularly from the pick-up in demand," Neumann said. In the recent monetary policy review, RBI kept policy rate static at 8 per cent citing upside risks to inflation in view of uncertain monsoon and its impact on food production as also volatile international oil prices.

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