Indian manufacturing slips for second month in a row

Posted on 1 Oct 2013

Operating conditions across the Indian manufacturing sector deteriorated for the second consecutive month in September, says HSBC’s India Manufacturing PMI, but at a slower pace.

September is the second month in a row that Indian manufacturing metrics, compiled by market research group and authors of the PMI Markit, have fallen and job cuts have followed.

Despite the slip, both output and new orders contracted at slower rates. The HSBC’s India Manufacturing PMI reports, “however, faced with fewer projects, companies reduced their workforce numbers for the first time since February 2012.”

Up from 48.5 in August to 49.6 in September, the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) indicated a marginal and slower deterioration of business conditions in India. However, the PMI quarterly average for Q3 was the lowest since Q1 2009.

The figures follow a run of lacklustre news about the state of the BRIC economy.

September data pointed to a further contraction of manufacturing production in India, with panellists commenting on lower levels of incoming new work and economic instability. The overall rate of contraction was, however, marginal and has eased since August.

Commenting on the PMI survey, Leif Eskesen, chief economist for India & ASEAN at HSBC said: “Manufacturing activity continued to shrink in September, albeit at a slower pace. Order flows remain weak, especially export orders, and employment fell.

“Moreover, businesses cut back quantity and stocks of purchases. While output prices rose at a slower pace, input prices rose markedly, as the effects of the weaker exchange rate continue to pass through.

“Despite the weak growth readings, the build-up in underlying inflation pressures suggests that the RBI has to keep its inflation guards up.”