Factory activity expands at slower clip in August

Written by Reuters | Bangalore | Updated: Sep 2 2014, 05:54am hrs
Factory growth eased in August from July's 17-month record pace as new orders came in at a slower clip, a business survey showed on Monday.

The HSBC Manufacturing Purchasing Managers' Index (PMI), compiled by Markit, fell to 52.4 in August from 53.0 in July but chalked up its tenth month above the 50 mark that divides growth from contraction. The new orders sub-index fell to 54.5 from 55.9, still considered a healthy pace of expansion.

"Output and new orders slowed slightly in August, but remained robust relative to their 12-month history," said Frederic Neumann, co-head of Asian economic research at HSBC. "The mood remains positive too, with firms accumulating inventory in response to stronger demand."

India's gross domestic product grew at an annual rate of 5.7% in the quarter to June, its fastest growth rate in two-and-a-half years.

But inflation will continue to be a concern for policymakers, the survey showed. Although the sub-index for input prices cooled in August, it remains high. "This is likely to keep the central bank guarded against inflation risks," Neumann added.

In July, consumer inflation accelerated to a two-month high of 7.96%.

The Reserve Bank of India kept its key policy rate on hold in August. Governor Raghuram Rajan stressed that his next goal was to bring retail inflation down to 6% by January 2016, although he warned of upside risks to that target.