Manufacturing activity drops to all-time low on record; PMI shrinks for first time in nearly 3 years

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Updated: May 04, 2020 10:49 AM

Manufacturing PMI stood at a mere 27.4 in April, which was 51.8 in March.

PMI, manufactruing PMI, factory growth, industrial productionManufacturing PMI pointed to the sharpest deterioration in business conditions across the sector since data collection began over 15 years ago

The nationwide lockdown due to coronavirus pandemic has pushed India’s manufacturing PMI to contract for the first time in the last 33 months. Manufacturing PMI stood at a mere 27.4 in April, which was 51.8 in March. The latest reading has pointed to the sharpest deterioration in business conditions across the sector since data collection began over 15 years ago, IHS Markit said in its report. The fall in manufacturing activities has directly affected the employment conditions too. The reduction in employment was the quickest in the survey’s history. There was a similar trend in purchasing activity, with firms cutting input buying at a record pace.

“After making it through March relatively unscathed, the Indian manufacturing sector felt the full force of the coronavirus pandemic in April. In the latest survey period, record contractions in output, new orders, and employment pointed to a severe deterioration in demand conditions,” said Eliot Kerr, Economist at IHS Markit. Meanwhile, there was evidence of unprecedented supply-side disruption, with input delivery times lengthening to the greatest extent since data collection began in March 2005, Eliot Kerr added.

Also Read: PM Modi holds key meeting with Amit Shah, Nirmala Sitharaman on steps for financial sector

The Purchasing Managers’ Index (PMI) by IHS Markit is based on various factors such as output, new orders, new export orders, backlogs of work, output prices, and input prices. Suppliers’ delivery times, stocks of finished goods, quantity of purchases, stocks of purchases, employment, and future output also play a major role in determining the manufacturing PMI.

It is compiled from responses to monthly questionnaires sent to purchasing managers in around 400 manufacturers. Survey responses are collected in the second half of each month and indicate the current trend. The index is a perception of how the sector will perform. The reading can vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.

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