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Factory PMI decelerates slightly for second straight month in August

03 Sep 2018 Evaluate

Amid slower gains in output and new orders, business activity in Indian manufacturing sector eased further in August 2018, for a second straight month.  As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance -fell to 51.7 in August from 52.3 in July. Nevertheless, despite a slight deceleration, the manufacturing sector activity expanded for the thirteenth consecutive month as the PMI reading stood above the watershed 50 mark, which differentiates growth from contraction.

The report further highlighted that despite softening in August month, the output and new orders continued to extend the current period of expansion for thirteenth and twelfth month, respectively, on the back of strong underlying demand. Besides, orders from abroad rose for the tenth consecutive month during August and the rate of expansion was marked and accelerated to the strongest since February. However, job creation remained marginal and broadly similar to the previous survey period, even though firms were encouraged to raise their staffing levels during reported month.

On the inflation front, the manufacturing companies continued to face higher input costs during August, due to higher raw material costs with the weakening currency.  Although sharp, input cost inflation moderated to the weakest since May. The report further found that the firms raised their selling prices for the thirteenth consecutive month in August, in order to protect margins. Meanwhile, business optimism towards the 12- month outlook for output softened from July’s three month high.

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