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HSBC India Manufacturing PMI falls to five-month low of 51.2 in February

02 Mar 2015 Evaluate

In not so encouraging development for the economy, HSBC Manufacturing Purchasing Managers’ Index (PMI) survey showed that India’s manufacturing sector expanded at its slowest pace in five months in February as slowdown in new orders dragged the overall output. Dropping to its lowest level since September 2014, headline HSBC India Purchasing Managers’ Index fell from 52.9 in the previous month to 51.2 in February. A figure above 50 indicates the sector is expanding, while a figure below that level means contraction. Nevertheless, February marked 16th straight month of factory activity expansion.

The survey showed that recent slowdown was broad-based by sector, with softer increases recorded in the consumer, intermediate and investment goods sub-sectors. Meanwhile, new order although rose for sixteenth month in succession the growth was at the weakest pace since last September. The new orders sub-index fell to 51.9, the lowest level in five months, from January’s 54.4. The drop underscored softer domestic demand, which also accounted for a slight cut in headcount at firms.

On inflation, HSBC survey pointed that prices paid for inputs by goods producers in India decreased for the first time since March 2009, while output charge inflation was historically muted as some manufacturers offered discounts due to a competitive environment.

However, in a bit of positive for the economy, foreign orders rose at a strong and accelerated pace and the PMI remained in positive territory. The survey highlighted that these factors brighten the prospects for a rebound in output and employment in coming months. Also, if India was to grow strongly in the coming years, expanding at pace of 8.5% as highlighted by the government in the Union Budget 2015-16, then manufacturing sector too would get a boost.

 

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