Manufacturing activity saw its best performance in six months in June, due to strong output levels and new order numbers, according to a private sector survey.
The Nikkei India Purchasing Managers’ Index registered a reading of 53.1 in June, compared to 52.2 in May. A reading over 50 indicates expansion, while a score below 50 denotes a contraction.“India’s manufacturing conditions improved in June at the strongest pace since December 2017, supported by the sharpest gains in output and new orders in 2018 so far,” the report said.
Reflecting greater production requirements, firms were encouraged to engage in purchasing activity and raise their staffing levels.
“Manufacturing production rose in June, thereby extending the period of expansion to 11 months,” the report added.“Moreover, the rate of growth was sharp and the most pronounced since last December. Panellists linked greater output to favourable demand conditions. Output growth was reported across all market groups.”
The report went on to say that the expansion in output was bolstered by a surge in new orders. The new orders also increased due to an increase for the eighth consecutive month of overseas orders.
“New orders from overseas rose for the eighth consecutive month,” the report said. “Moreover, the rate of expansion was solid and accelerated to the fastest since February. Anecdotal evidence pointed to stronger demand from key international markets.”
“On the jobs front, the latest survey data pointed to a healthy labour market, with job creation accelerating to the sharpest since December 2017,” Aashna Dodhia, Economist at IHS Markit and author of the report, said.“The RBI recently raised interest rates for the first time in four years to contain inflation and stabilise the rupee. However, input cost inflation quickened to the strongest since July 2014 in June, suggesting that the central bank could remain under pressure to tighten monetary policy.”
Looking ahead, Ms Dodhia said there was a note of caution, as business sentiment eased to the weakest since last October during June. The dip in optimism, she said, partly reflected concerns of a potential market slowdown in the year ahead.
“Indeed, some of the key challenges to the 12-month outlook include tighter domestic monetary policy and persistently high inflation,” Ms. Dodhia said.
