Manufacturing activity picks up in June, PMI at 3-month high

The upturn compares with an average 0.5 point decline between May and June over the last ten years

Manufacturing activity saw a pick up in June after two months of sluggish growth, according to a private survey.

The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose to 51.7 in June from 50.7 per cent in May. The index was at 51.3 in June 2015.

“Supported by a stronger increase in new business inflows, Indian manufacturers raised production at a faster rate during June,” according to the Nikkei Manufacturing PMI report for India. “The favourable operating environment encouraged businesses to purchase additional inputs but was insufficient to generate jobs,” it said.

“The upturn is significant when compared to the average 0.5 point decline between May and June over the last ten years,” Sonal Varma and Neha Saraf, analysts at Nomura, wrote in a research note.

“Moreover, it reinforces our view that the weakness in the preceding two months was partly driven by transitory factors, like elections in five states.”

Domestic demand

The new orders index rose to 52.9 from 51.3 in May, mainly led by an improvement in domestic demand.

“The PMI data suggest that external demand remains lacklustre even as domestic demand continues to support growth, led by consumption,” the note said.

“We expect GDP growth (at market prices) to pick up to 7.3 per cent in 2016 from 7.2 per cent in 2015, largely driven by private consumption and public investment,” it said.