The manufacturing sector output eased in April after a solid rate of growth witnessed in the previous month as the pace of order flows slowed down following which, companies reduced their staffing levels, an HSBC survey said today.
The headline HSBC India Purchasing Managers’ Index (PMI), compiled by Markit, stood at 51.3 in April, down from 52.1 in March, pointing to a weaker improvement in operating conditions across various industries.
The PMI is a composite gauge designed to give a single figure snapshot of manufacturing business conditions. A figure above 50 indicates that the sector is expanding, while a figure below that level means contraction.
“Despite recording softer rates of expansion, the Indian manufacturing sector held its ground in April, benefiting from ongoing improvements in operating conditions,” Markit Economist Pollyanna De Lima said.
The headline index was recorded above the crucial 50.0 threshold for the 18th successive month.
“However, we are yet to see growth leading to meaningful job creation, as the index measuring employment has shown little change to staff numbers since the beginning of 2014,” Lima added.
April saw companies maintain a cost-cautious approach to hiring and vast majority of panelists signalled no change in employment levels.
On the price front, tariffs fell for the first time since May 2013, as firms responded to a weaker cost inflation, HSBC said.
“Even with the slower pace of expansion, the goods-producing sector is on course to provide a boost to the overall economy in the upcoming quarter,” Lima added.
In the monetary policy review in April, RBI kept the key policy rate unchanged on fears of unseasonal rain impacting food prices. It has reduced repo rate by a total of 0.5 per cent since January. The next review is due in the first week of next month.
Indian manufacturing growth slows on weaker demand in April: PMI
Indian manufacturing growth eased in April as domestic demand softened, despite factories cutting prices for the first time in nearly two years, a business survey showed on Monday.
Falling inflation and a slowing manufacturing industry would reinforce expectations that the Reserve Bank of India will again cut interest rates soon from the current 7.5 percent.
“The data supports a rate cut they will continue cutting rates but slowly, perhaps waiting until the upcoming meeting,” said Pollyanna De Lima, economist at Markit.
The RBI has already cut rates twice this year. Both times it surprised markets by announcing the cuts a few days prior to its scheduled policy reviews and there is a 60 percent chance it will move ahead of the next one on June 2, a Reuters poll found last week.
The HSBC Manufacturing Purchasing Managers’ Index , compiled by Markit, fell to 51.3 in April from March’s 52.1 but marked its eighteenth month above the 50 level that separates growth from contraction.
Manufacturers reduced selling prices for the first time since May 2013, taking advantage of a weaker rise in the costs of their raw materials, but that failed to attract new orders.
An index monitoring new business, which highlights underlying demand, fell to 51.9 in April from 53.2. Firms also reduced staffing levels last month.
A revamp of the way India measures its economy has resulted in India’s growth overtaking China’s, restoring it to rank among the fastest growing in the world.
Lower interest rates and long-awaited economic reforms could spur growth further.
Data to be released at the end of this month is expected to show the economy grew 7.4 percent during the January-March quarter, slightly slower than the 7.5 percent reported in the last three months of 2014.