Fresh signs of slowdown in manufacturing growth

Manufacturing growth may have declined to its slowest pace in 29 months in August as export orders dried up amid weakening global demand.

The HSBC Markit India Manufacturing Purchasing Managers’ Index (PMI) for India fell to 52.6 in August from 53.6 the previous month — the slowest since March 2009.

PMI reflects the percentage of purchasing managers in a certain economic sector that reported better business conditions than in the previous month and is one of the indicators the Reserve Bank of India (RBI) keeps a watch on.

A PMI of above 50.0 indicates an expansion in manufacturing activity, while one below 50.0 suggests a contraction. India’s manufacturing PMI has remained above 50.0 since April 2009.

“The main driver of the weaker reading was a significant contraction in export orders, which are facing stiff global economic headwinds,” Leif Eskesen, HSBC chief economist for India and Asean, wrote in his report.

Economists see exports falling further.

“Due to the global slowdown, exports of India are pushed downwards. It may come off further,” said Indranil Pan, chief economist, Kotak Mahindra Bank.

A few economists feel the manufacturing sector is running below the past trends. “Running well below average levels seen prior to the global financial crisis, it suggests the Indian manufacturing sector is probably running below trend. Equally, however, there is little genuine evidence of weaker activity beginning to lessen price pressures,” said Mole Hau, BNP Paribas Corporate and Investment Banking.

With NW18 inputs