Manufacturers post fastest growth in a year in February

Written by Reuters | Bangalore | Updated: Mar 4 2014, 11:04am hrs
Indian manufacturing activity and new orders showed their strongest growth in a year in February, according to a survey released on Monday that suggested that the worst is over for Indian factories struggling through an economic slowdown.

The survey's results should provide some relief after data on Friday showed Asia's third-largest economy grew by a slower-than-expected 4.7% annually in the three months through December, dragged lower by a contraction in manufacturing and mining.

The HSBC Manufacturing Purchasing Managers' Index (PMI), which gauges the business activity of India's factories but not its utilities, rose to 52.5 in February, its highest in a year, from 51.4 in January.

Overall new orders for factory goods, which rose to a one-year high of 54.9 contributed to the surge. Export orders climbed to their highest in eight months.

"Manufacturing activity picked up further in February. New order flows have firmed, with the improvement in external demand and the reduction in macroeconomic uncertainty since last summer," said Leif Eskesen, Chief Economist for India & ASEAN at HSBC.

Opinion polls show the BJP is likely to win the largest block in parliament in a general election due by May, but it is uncertain how much support it will need from smaller regional parties to form a coalition.

While some potential coalition partners could be put off by Narendra Modi's brand of Hindu nationalism, the BJP's candidate for prime minister is regarded as business friendly and dynamic, and several leading industrialists have voiced their support.

The HSBC survey showed a sharp rise in input prices in February although firms passed these rises on at a slower pace than last month. Costlier raw material prices for manufacturers could lead to higher consumer price inflation, which was running at 8.79% annually in January.