India manufacturing growth jumps to 5-month high in Nov: HSBC PMI

Comments 0
Growth driven by strong pick up in new orders and improved purchasing activity, survey said. (Reuters) Growth driven by strong pick up in new orders and improved purchasing activity, survey said. (Reuters)
SummaryGrowth driven by strong pick up in new orders and improved purchasing activity, survey said.

India's manufacturing sector growth improved in November, registering the fastest pace in five months, driven by a strong pick up in new orders and improved purchasing activity, an HSBC survey said today.

The HSBC India Manufacturing Purchasing Managers' Index (PMI) - a measure of factory production -- stood at 53.7 in November, up from 52.9 in October, indicating a further improvement in the health of the Indian manufacturing sector.

The index has remained above the 50-mark, below which it indicates contraction, for more than three years now.

The November reading of HSBC PMI points to the fact that the sector has gained momentum in the last few months, after it registered the weakest pace of growth rate in nine months in August.

"The manufacturing sector gained momentum thanks to a strong pick up in new orders, which lifted output growth," HSBC Chief Economist for India and ASEAN Leif Eskesen said.

However, output growth remains constrained by power shortages, HSBC said adding that backlogs of work still rose, although at a slower pace than in October.

"Output remains constrained by continued power shortages and stocks of finished goods were, consequently, drawn down again to meet the rise in demand," Eskesen added.

On inflation, HSBC said In line with higher input costs, prices charged by manufacturers in India increased during November. The rates of inflation were robust, and faster than in October, which were mainly driven by higher raw material and diesel costs led to the latest increase in input prices.

"Inflation picked up again as higher raw material prices increased input costs for firms and they had enough pricing power to pass these on to end consumers due to the firm demand conditions," Eskesen said.

The RBI is scheduled to announce its mid-quarter monetary policy review on December 18. Reserve Bank governor D Subbarao has resisted a widespread call for the growth-propping rate cuts for some time now, citing the elevated inflation.

"The PMI numbers suggest that the RBI should continue to abstain from easing," Eskesen said.

Inflation as measured by all indices has remained elevated and Wholesale Price Index-based inflation has remained above the Reserve Bank's comfort zone of 5 to 5.5 per cent for nearly three years now.

Meanwhile, job creation was recorded in the Indian manufacturing sector in November for the ninth successive month, though the pace of expansion was only slight, HSBC said.

India factory index accelerates to 5-month high in November

(Reuters) India's manufacturing sector beat the expectations of economists to grow at its fastest pace in five months in November, boosted by strong export orders and a surge in output, a business survey showed on Monday.

The HSBC manufacturing Purchasing Managers' Index (PMI) , which gauges the business activity of India's factories but not its utilities, rose to 53.7 in November from 52.9 in October.

Readings above 50 denote growth, and economists had forecast a rise to 53.1 in November.

Although India's factory activity has now expanded for over three-and-a-half years, it is a long way from the robust growth seen before the onset of the financial crisis in 2007.

Asia's third-largest economy grew 5.3 percent from a year earlier in the quarter to September, provisional government data showed last week, extending its long slowdown. It is now headed for its weakest full year growth in a decade.

"The manufacturing sector gained momentum thanks to a strong pick up in new orders, which lifted output growth," said Leif Eskesen, economist at HSBC.

The new export orders sub-index rose to a six-month high of 55.9 in November, giving thrust to overall orders and factory output, both of which expanded at their fastest pace since July.

While there is strong overseas demand for Indian goods, a looming fiscal crisis in the United States could put the brakes on exports if lawmakers fail to agree a fix, as happened between July and October 2011, when the U.S. last hit a legal debt ceiling.

The survey also showed both input and output prices rose sharply in November, after rising at a slower pace in October.

That could put renewed pressure on India's headline inflation rate which at 7.5 percent in October, is well above the Reserve Bank of India's commonly perceived comfort zone around 5 percent.

"Inflation picked up again as higher raw material prices increased input costs for firms and they had enough pricing power to pass these on to end consumers due to the firm demand conditions," Eskesen said.

The central bank has held interest rates steady since April, citing high price pressures, even as many other central banks around the world have cut rates.

It has, however, cut the cash reserve ratio from 6.00 percent to 4.25 percent between January 2011 and October this year to prevent a potential liquidity crunch in financial markets.

With growth slowing in recent months, the din for a rate cut from financial markets has grown louder. But Eskesen said the PMIs suggest the central bank should not ease rates.

Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...