1. Robust improvement in manufacturing business: Sector growth hits nearly 2-year high in October

Robust improvement in manufacturing business: Sector growth hits nearly 2-year high in October

A reading above 50 in terms of manufacturing performance indicates expansion, while the marking below it means contraction.

By: | New Delhi | Published: November 1, 2016 1:43 PM
Manufacturing sector (PMI) — a gauge of manufacturing performance — rose to 54.4 in October from 52.1 in September

Manufacturing sector growth in India hit a 22-month high in October, driven by a sharp and accelerated increase in new orders, purchasing activity and output, a monthly survey showed today.

The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) — a gauge of manufacturing performance — rose to 54.4 in October from 52.1 in September, indicative of a robust improvement in manufacturing business conditions in the country.

A reading above 50 in terms of manufacturing performance indicates expansion, while the marking below it means contraction.

“October data provide positive news for India’s economy, as manufacturing output and new orders expanded at the fastest rates in 46 and 22 months, respectively,” Pollyanna De Lima, Economist at IHS Markit and author of the report, said.

In October, output increased for the 10th straight month and at the quickest rate in nearly four years and survey respondents attributed the latest rise in production to strong growth of new orders.

“The sector looks to be building on the foundation of the implied pick-up in growth in the previous quarter,” Lima said but added that the extended easing cycle of the Reserve Bank, however, brought upside risks to inflation.

The Monetary Policy Committee (MPC), which has three members nominated by the government and the rest from RBI, lowered repo rate to 6.25 per cent from 6.50 per cent at the end of 2-day deliberations on October 4.

The next meeting of the MPC is scheduled on December 6 and 7.

On prices the survey said that part of the increase in cost burdens was passed on to consumers by way of higher selling prices, which is likely to continue on an upward trend as we head towards the year end.

The amount of new work received by manufacturers grew markedly during October and the rate of expansion hit a 22-month high, largely driven by improved underlying demand.

“The domestic market was the prime source of new business gains, but let’s not forget that there is also a robust export component in these positive numbers,” Lima said.

According to the survey, although foreign orders contributed to the upturn in total new work, the rate of growth in new business from abroad eased to a three-month low.

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