India's manufacturing growth slips in April as orders drop
India’s manufacturing sector witnessed slower growth during April as companies reduced staffing due to weaker pace of order flows, an HSBC survey said on Monday. At 51.3 in April, down from 52.1 in March, the HSBC India Purchasing Managers’ Index (PMI) pointed to a weaker improvement in operating conditions across the sector. However, new order volumes continued to rise in April, marking an 18-month expansionary sequence, said the report compiled by Markit. The index below 50 point means that the manufacturing sector is contracting. “Despite recording softer rates of expansion, the Indian manufacturing sector held its ground in April, benefitting from ongoing improvements in operating conditions,” said Pollyanna De Lima, Economist at Markit. The survey also highlighted strong external market, with the rise in new export business remaining solid. The level of new export orders increased at a solid pace that was unchanged since the prior month. Companies reported greater inflows of new business from key export clients, but in particular from those operating in Asia, it said. Higher output was recorded across the three monitored categories, with growth strongest at capital goods firms and slowest in the consumer goods sub-sector. In April, companies maintained cost-cautious approach towards hiring. “Nevertheless, the rate of job shedding was fractional overall as the vast majority of panellists signalled no change in employment levels,” the report said. Purchasing activity saw a moderate growth in April, leading to a weaker accumulation in pre-production stocks. The latest increase in buying levels was the least since October 2014. The survey also found slower increase in holdings of finished goods. Input prices continued to rise in April, albeit at a weaker rate. Companies signalled further price increases for a number of raw materials, but also reported successful negotiations with suppliers. Manufacturers indicated that discounts had been offered as part of efforts to secure new business. “On the price front, tariffs fell for the first time since May 2013, as firms responded to weaker cost inflation. Even with the slower pace of expansion, the goods-producing sector is on course to provide a boost to the overall economy in the upcoming quarter,” Lima said. The monthly Purchasing Managers’ Index is a key indicator of overall operating conditions across sectors. It also helps policy makers to predict market situations and take appropriate measures. During its latest monetary policy review held in April, the Reserve Bank of India (RBI) kept the key policy rates unchanged fearing hike in food prices due to unseasonal rain. The next review is due in the first week of June.
May 4, 2015 | 7:05 pm IST.
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