Updated: July 3, 2022 7:42:20 am
India’s manufacturing sector growth fell in June as growth of total sales and production eased amid intense price pressures, as per an S&P Global India survey. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) declined to 53.9 last month from 54.6 in May, with the latest reading showing the weakest pace of growth since last September 2021. A reading below 50 indicates contraction.
The economic recovery of the Indian manufacturing sector continued in June, aided by robust domestic and international client demand. However, growth of total sales and production eased amid intense price pressures, S&P Global India said.
Although the rate of input cost inflation remained historically high, the latest increase was the slowest in three months, a trend that was likewise seen for output charges, it said. Inflation concerns continued to dampen business confidence, with sentiment slipping to a 27-month low. Elsewhere, input delivery times shortened for the first time since the onset of Covid-19, the survey said.
S&P Global India said softer increases in production, factory orders, stocks of purchases and employment all dragged down the PMI in June, alongside an improvement in supplier performance which is inverted before entering the calculation. Factory orders and production rose for the twelfth straight month in June, but in both cases the rates of expansion eased to nine-month lows, the survey added.
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It said increases were commonly attributed to stronger client demand, although some survey participants indicated that growth was restricted by acute inflationary pressures.
June data indicated that rates of purchase price and output charge inflation retreated to three-month lows, but remained above their respective long-run averages, S&P Global said.
“The Indian manufacturing industry ended the first quarter of fiscal 2022/23 on a solid footing, displaying encouraging resilience on the face of acute price pressures, rising interest rates, rupee depreciation and a challenging geopolitical landscape,” said Pollyanna De Lima, associate director, S&P Global Market.
“Yet, there was a broad-based slowdown in growth across a number of measures such as factory orders, production, exports, input buying and employment as clients and businesses restricted spending amid elevated inflation,” she added.
There was positive news regarding supply chains, with the latest results showing the first shortening of input lead times since the onset of Covid-19.
“This seemed to have curbed the upward pressure on input costs, with purchase prices and output charges increasing at sharp but slower rates during June. Companies nevertheless remained very concerned about inflation, a key factor that dragged down business confidence to a 27-month low,” S&P Global said.
Monitored firms reported increases for a wide range of inputs — including chemicals, electronics, energy, metals and textiles — which they partly passed on to clients in the form of higher selling prices. Although the outlook for the Indian manufacturing industry remained positive mid-way through 2022, sentiment slipped to a 27-month low. Fewer than 4 per cent of panellists forecast output growth in the year ahead, while the vast majority (95 per cent) expect no change from present levels. Inflation was the main concern among goods producers, it said.
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