Manufacturing PMI remains flat at 51.4 in September

‘Industry hit by subdued demand conditions, domestically and externally,’ says the Nikkei India Manufacturing Purchasing Managers’ Index

Published - October 01, 2019 08:58 pm IST - NEW DELHI

Picture for representation.

Picture for representation.

Manufacturing activity remained stagnant in September, posting the joint-lowest reading since May 2018, with the sector hit by subdued demand from within and outside India, according to a private sector survey.

The Nikkei India Manufacturing Purchasing Managers’ Index came in at 51.4 in September, the same reading as in August. A reading over 50 denotes expansion while one below 50 implies a contraction. “Indian manufacturers were again hit by subdued demand conditions domestically and externally, which led them to limit production, lower inventories and reduce input buying,” the report said.

“At the same time, business confidence sank to one of the lowest levels seen in over two-and-a-half years.”

“Manufacturing PMI was at 51.4 in September, unchanged from August and thereby posting its joint-lowest reading since May 2018,” the report added. “The figure still showed an improvement in the health of the sector, although one that was historically subdued.”

The report added that the PMI performance in the second quarter (July-September) of the financial year was the joint-weakest quarterly performance since the same period in 2017.

“Anecdotal evidence indicated that improved technology and new business gains at some firms boosted output, while other companies lowered production due to muted demand,” the report added.

The report said that growth was centred on the consumer goods sector, with declines registered in the other two monitored categories (capital goods and intermediate goods).

“We’ve seen the gradual slowdown in manufacturing sector conditions continue in the second quarter of fiscal year 2019-20, with the PMI average for the quarter at its joint-lowest since the same period in 2017,” said Pollyanna de Lima, principal economist, IHS Markit. “In September alone, forward-looking indicators such as business confidence and quantities of purchases were down, suggesting that companies are bracing themselves for difficult times ahead.”

That said, Ms. De Lima added that public policy stimulus in the form of the recently-announced corporate tax rate cuts and the possible benchmark interest rate cut in August by the Reserve Bank of India could help the manufacturing sector gain growth momentum.

“In light of the weak results for economic growth and muted inflationary pressures signalled by the PMI data, we expect to see further monetary easing in the months ahead,” Ms. De Lima said.

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