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India’s manufacturing PMI slows down to 3-month low in January

01 Feb 2013 Evaluate

After surging to six months high level in December, the seasonally adjusted HSBC Purchasing Managers’ Index, a composite indicator of operating conditions in the manufacturing economy slowed to three months low of 53.2 in January against its previous reading of 54.7 in December, thereby underscoring the risks to Asia's third largest economy from weak global demand, particularly in Europe.

Slower expansion in new orders and power outages mainly slowed the growth momentum in the manufacturing sector. Despite that, Indian goods-producing sector has shown output growth advancement for the forty-sixth consecutive month. The PMI index has now stayed above the 50 mark that separates growth from contraction for almost four years.

Meanwhile, the rise in the factory output, although solid, was the slowest recorded in three months amid evidence from the survey panel that ongoing issues with the supply of power had restricted growth (albeit to a lesser degree than seen at times during 2012).

New orders and export sales both increased at manufacturing companies in India in January. While, the volume of incoming new work at manufacturers in India increased in January. Total new business rose solidly, although growth eased from December. Meanwhile, new export orders increased for the fifth consecutive month, and also at a solid rate. The new orders sub-index in the survey, a reliable gauge of future output, slipped to 54.6 from 58 in December, showing the slowest pace of growth since October.

Further, January data signaled increased staffing level in the Indian goods-producing sector, amid reports of higher workloads. However, the pace of job creation was slight and unchanged from December.

Meanwhile, input and output prices both increased in January, with rates of inflation again marked. Input prices in the Indian manufacturing sector rose for the forty-sixth consecutive month with respondents indicating that fuel and raw material prices had increased, while Output charges were raised to protect margins in the face of higher costs. 

Nevertheless, the survey, which showed input and output prices rising at a slower pace during the month, suggests that India's inflation rate, which slowed to a three-year low of 7.18 per cent in December, is unlikely to change much, at least for now. 'Input and output price inflation continued to ease, albeit only gradually, supporting the case for the RBI's cautious policy rate cut earlier this week,' the report said.

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