Commenting on the India Manufacturing PMI survey, Leif Eskesen, chief economist for India & ASEAN at HSBC said, “The numbers confirm that tight capacity and monetary tightening is restricting growth. However, inflation pressures are still firmly in place, calling for further policy rate hikes to anchor inflation expectations”
The seasonally adjusted HSBC Purchasing Managers’ Index (PMI)—a headline index to measure the overall health of the manufacturing sector—posted 55.3 in June, down from May’s 57.5 the slowest since September 2010.
New business received by manufacturers in India increased substantially during June, extending the sequence of sustained growth to twenty-seven months. However, the latest expansion was the slowest seen during 2011. While new export orders witnessed a decent rise, the rate of increase was the weakest since November 2009.
Looking at the slowdown in overall new order growth, the latest rise in output was also lower than that recorded in May. With reports of labour shortages and power cuts impacting negatively on production, backlogs of work increased for a 15th successive month. While the latest accumulation eased since May, it was stronger than the historical average. A marginal rise in finished goods stocks was indicated in June, although the majority of panellists noted no change in levels of post-production inventories.
A substantial increase in purchasing activity was recorded in June. However, the rise was weaker than in the previous month as many companies stated that high raw material costs curbed their purchasing power. Suppliers’ delivery times continued to lengthen, suggesting that vendor performance was negatively impacted by higher levels of input buying, alongside shortages of materials, labour and power.
June data showed a substantial rise in input costs faced by Indian manufacturers that was driven by higher prices for raw materials. Output prices also rose at an above average rate, but the latest increase slowed to the weakest in seven months as pricing power was restricted by strong competition for new business.
Commenting on the India Manufacturing PMI survey, Leif Eskesen, chief economist for India & ASEAN at HSBC said: “The momentum in the manufacturing sector slowed in June as sequential growth in output and new orders slowed further. These numbers confirm that tight capacity and monetary tightening is constraining growth. However, inflation pressures are still firmly in place, calling for further policy rate hikes to anchor inflation expectations.”