After scaling a 13-month high in August, growth in the country’s manufacturing sector eased in September, mainly due to a slowdown in new business inflows, according to the Nikkei purchasing managers’ index (PMI) survey. However, new export orders recorded their strongest rise since July 2015, indicating that the country’s exports may finally be heading for better times after witnessing contraction in 20 of the past 21 months through August. Also, despite the moderation in the overall manufacturing PMI in September, the survey showed manufacturing output is rising at a faster pace in the second quarter of this fiscal than the previous one. This brightens the prospect of an improvement in the GDP data for the sector for the September quarter.
The headline manufacturing PMI touched 52.1 in September, down from 52.6 in the previous month. Any reading above 50 points indicates expansion, while one below that mark suggests contraction. This also shows manufacturing output recorded growth for nine months in a row, though the rate of expansion moderated in September. The manufacturing PMI is a composite index comprising five individual indexes such as new orders, output, employment, suppliers’ delivery time and stock of items purchased.
“Output is still rising at a decent clip and the sector looks likely to have delivered a stronger contribution to GDP growth in second quarter of 2016-17, with the quarterly reading for the PMI output index up from 51.4 during April-June to 53.6 (in July-September period),” said Pollyanna De Lima, economist at IHS Markit that compiles the data and author of the report.
According to the GDP data, the gross value added in manufacturing grew 9.1% in the first quarter of this fiscal, slower than 9.3% in the previous quarter but higher than 7.3% recorded a year before.
“Foreign new orders for Indian-manufactured goods expanded markedly in September, and at the quickest rate in 14 months,” Nikkei said in a statement. The survey also revealed an intensification of inflationary pressures, as both input costs and output charges increased at quicker rates.
Average purchase costs increased at a faster pace in September, though they still remained weak compared with the long-run trend. The main item reported to be up in price was steel, the report said.
“Data implied that manufacturers attempted to protect profit margins as output charges were raised further,” the statement said.