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Manufacturing PMI slows to 52.4 in August

01 Sep 2014 Evaluate

Business activity in Indian manufacturing sector eased in August from July’s 17-month record pace as new orders came in at a slower clip. The HSBC Manufacturing Purchasing Managers’ Index (PMI), a headline index designed to measure the overall health of the manufacturing sector, fell to 52.4 in the month of August from 53 in the previous month. However, manufacturing PMI reading remained above 50 mark indicating expansion in operating conditions and was supported by strong expansions in total new orders and business from abroad. Among the monitored sub-sectors, consumer goods sector witnessed high output growth, however, business conditions deteriorated in the capital goods category.

The HSBC survey highlighted that new orders increased for a tenth month in succession. The new orders sub-index fell to 54.5 from 55.9, still considered a healthy pace of expansion. Similarly, new export orders rose in August, extending the current sequence of growth to 11 months. Manufactures attributed expansions in foreign business to strengthening demand from key export clients.  Amid continued growth in demand, Indian manufacturers picked up their purchasing activity for a tenth month running in August and the steepest rise in buying activity was recorded by consumer goods companies, whereas producers of capital goods reported a reduction. Subsequently, input stocks and post-production inventories held by Indian manufacturers grew in the reported month in order to respond to expansions in new orders. However, workforce numbers declined for a second successive month in August.

The survey further indicated high inflationary pressure with factory gate prices rising during the month. Manufactures paid higher prices for raw materials, indicating that input costs rose strongly in August. However, the rate of cost inflation slowed from the previous month July. The pace of charge inflation at Indian manufacturers was slight overall. All three monitored sub-sectors recorded price rises and the sharpest increase recorded in the consumer goods category.

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