Manufacturing growth in May slowest in 5 months: PMI

Indian manufacturing sector want more rate cuts from the Reserve Bank of India to boost investment. File photo

Manufacturing output rose for the fifth consecutive month in May though the growth was marginal, according to a survey.

The Nikkei Manufacturing Purchasing Managers’ Index (PMI), compiled by Markit, rose to 50.7 in May from 50.5 in April. A reading above 50 indicates expansion while one below implies contraction.

“Following broadly stagnant levels in April, order book volumes increased during May,” according to the Markit report.

“The pace of expansion was, however, only slight and well below its long-run average. Data implied that growth was centred on the domestic market as new business from abroad decreased,” it said.

Some improvement “PMI manufacturing numbers signal some improvement in overall operating conditions for the manufacturing sector,” said Rishi Shah, economist, Deloitte.

PTI adds

As per the survey, subdued demand and an increasingly competitive environment appears to have restricted pricing power among goods producers, as output charges were raised only marginally despite cost inflation climbing to a 14-month high.

“So far, there is little evidence that the latest cut in the benchmark rate acted to significantly improve business conditions for manufacturers. Therefore, further stimulus may be necessary to shift the economy into a higher gear,” Ms. Lima said.

Earlier in April, the RBI cut its policy rate by 0.25 per cent to 6.5 per cent. While this was the first rate cut after a gap of six months, the RBI has lowered its rate by 1.5 per cent cumulatively since January 2015.

However, the industry still wants further rate cuts from the apex bank to boost investment.

Meanwhile, the Indian economy grew at 7.9 per cent in the fourth quarter of 2015-16 taking the overall GDP growth to a five-year high of 7.6 per cent in the fiscal.