India’s Factory Activity Grew at Fastest Pace in Over Eight Years in September: PMI

NEW DELHI: Buoyed by accelerated increases in new orders and production, India’s factory activity expanded to its highest level in eight and a half years, a private survey showed on Thursday.

The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) increased to 56.8 in September from 52 in August, signalling back-to-back improvements in the health of the sector since the easing of lockdown restrictions in June. A reading above 50 indicates expansion, while below that signals contraction.

“The Indian manufacturing industry continued to move in the right direction, with PMI data for September highlighting many positives. Due to loosened Covid-19 restrictions, factories went full steam ahead for production, supported by a surge in new work,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.

As per the survey, manufacturers lifted output for the second straight month in September amid loosened restrictions and higher demand.

‘The increase was sharp and the third-quickest in the history of the survey,” it said.

Similarly, there were back-to-back increases in new business inflows. The rate of expansion picked up to the fastest since early-2012. Moreover, exports also bounced back, following six successive months of contraction, while inputs were purchased at a sharper rate and business confidence strengthened.

The increase in input buying was the strongest in over eight-and-a-half years.

The PMI average for the second quarter of FY21 rose to 51.6 from 35.1 in the June quarter.

India’s economy contracted a record 23.9% in the quarter ended June 30, 2020 and a poll of independent economists has pegged the second quarter contraction at 8-15.6%.

Employment Woes, Upbeat Projection:

Despite strong growth of order book volumes, Indian goods producers signalled another reduction in payroll numbers, according to the survey report. In many cases, this was attributed to efforts to observe social distancing guidelines. Employment has now decreased for six consecutive months.

“One area that lagged behind, however, was employment. Some companies reported difficulties in hiring workers, while others suggested that staff numbers had been kept to a minimum amid efforts to observe social distancing guidelines,” said De Lima.

As a result of lower headcounts and rising sales, companies noted a further increase in their backlogs of work.

However, upbeat projections reflected hopes of fewer coronavirus cases, projects in the pipeline and enquiries from new clients.

“While uncertainty about the Covid-19 pandemic remains, producers can at least for now enjoy the recovery.”

Almost one-third of manufacturers expect output growth in the coming 12 months, against 8% that foresee a contraction, resulting in the strongest degree of overall optimism in over four years.

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Source: ET

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