India's Manufacturing PMI points to another substantial decline in health of sector
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Business & Economy

India's Manufacturing PMI points to another substantial decline in health of sector

NetIndian News Network

New Delhi, June 1, 2020

The IHS Markit India Manufacturing Purchasing Managers Index (PMI) rose to 30.8 in May, from 27.4 in April, but the reading pointed to another substantial decline in the health of the sector during the COVID lockdown, though it was slightly softer than the one recorded in April.

"Amid the ongoing coronavirus lockdown, Indian manufacturers recorded another sharp deterioration in business conditions during May," a press release from IHS Markit said.

"Weaker demand drove output lower following April's record decline. Consequently, firms cut staff numbers at the quickest pace since data collection began over 15 years ago," it said.

The release said that, in a sign of further demand weakness, new orders placed with goods producers continued to fall after April's record contraction. The rate of decline decelerated but was still the second-fastest since the series' inception in March 2005.

It said panellists often mentioned prolonged closures at their clients when explaining the latest reduction in sales.

"Weak demand from international markets added to the deteriorating sales trend, with new business from abroad plunging further in May. Anecdotal evidence suggested that global measures to stem the spread of COVID-19 continued to stifle exports," it said.

According to the release, faced with a further deterioration in demand conditions, firms continued to cut back production midway through the second quarter. The reduction was slower than April's unprecedented decline, but still severe overall.

It said lower production requirements saw Indian manufacturers continue to reduce worker numbers in May. Moreover, the rate of workforce contraction accelerated to the fastest in the survey's history, eclipsing the previous record set in April, it said.

"Similarly, goods producers needed fewer physical inputs in May and subsequently pared back their purchasing activity. The pace of decline was softer than in April, but remained historically marked," it said.

The release said that, meanwhile, input prices faced by Indian manufacturers continued to fall. Though solid overall, the rate of reduction eased considerably from April's record. Panel members often mentioned that their suppliers had cut prices in an attempt to secure orders.

"Firms opted to pass on lower costs to their clients, with another decrease in average output charges during May. In line with the trend for input prices, the latest reduction was far softer than that recorded in April.

"Finally, Indian manufacturers remained optimistic towards the one-year business outlook in May. Confidence was supported by expectations for a return to growth once all coronavirus-related restrictions are lifted. That said, the degree of positivity eased slightly from April and remained historically subdued," it said

Eliot Kerr, Economist at IHS Markit, said: "The latest PMI data suggested that Indian manufacturing output fell further in May. This result is particularly poignant given the record contraction in April which was driven by widespread business closures. The further reduction in May highlights the challenges that businesses might face in the recovery from this crisis, with demand remaining subdued while the longevity of the pandemic remains uncertain."

NNN

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