Business & Economy

Nikkei India Manufacturing PMI registers at 52.1 in February, 2018

NetIndian News Network

New Delhi, February 28, 2018

The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) fell from 52.4 in January to 52.1 in February as manufacturing operating conditions in the country improved for the seventh straight month.
"The overall upturn was driven by increasing output and new orders, but both registered at slightly slower growth rates. In response to greater production requirements, firms raised their staffing levels and purchasing activity," a press release from Nikkei said.
"On the price front, cost inflation accelerated to the fastest since last February. Meanwhile, manufacturers raised their output charges as part of attempts to pass through higher cost burdens to clients," it said.
The PMI is a seasonally adjusted composite single-figure indicator of manufacturing performance in the country. It is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 industrial companies. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.
The release said the PMI registered above the neutral 50.0 threshold for the seventh consecutive month and indicated a modest improvement in operating conditions. 
"That said, the headline PMI Index reported below the long-run average (54.1). Indian goods producers raised their manufacturing output for the seventh consecutive month during February. Despite easing from the preceding month, the rate of expansion was marked overall," it said.
Panellists attributed the increase in output to new client wins and favourable economic conditions.
"Output growth was recorded across all three broad market groups, led by consumer goods. Total new orders rose for the fourth successive month during February. Companies that registered higher new orders reported on improved underlying demand. That said, the rate of growth was modest and the lowest in the current upturn. At the same time, new export orders rose for the fourth consecutive month in February. Despite softening from January’s 16-month high, the rate of expansion was marked overall," the release said.
In response to greater production requirements, firms raised their staffing levels during February. Although modest, the pace of job creation was slightly faster than at the start of 2018. Panellists commented on stronger improved demand conditions.
Reflecting improved demand conditions, Indian manufacturers raised their purchasing activity during February. However, the rate of expansion eased to the weakest since October’s fall and was marginal.
Amid reports of delayed payments from clients, outstanding business rose during February. Though modest, the rate of backlog accumulation quickened to the fastest since October 2016. Input costs increased for the twenty-ninth month during February, with panellist reporting higher prices paid for steel, chemicals and fuel. Furthermore, input cost inflation accelerated to the sharpest in a year.
Manufacturers raised their output charges during February, thereby extending the period of inflation to seven months. Where selling prices were raised, there were reports of passing on higher cost burdens to clients. Although modest, output price inflation was the sharpest since last February.
Finally, Indian Manufacturers remained optimistic towards the 12-month outlook for output during February. Company expansion plans and forecasts of improvements in demand conditions were the key factors behind optimism.
“It was promising to see that India’s manufacturing sector remained in growth territory, as the impact of July’s Goods and Services Tax continues to dissipate. The expansion was primarily driven by a marked rise in manufacturing production, whilst there were reports of improved underlying demand, with domestic and external sources driving new business gains," Ms. Aashna Dodhia, Economist at IHS Markit and author of the report, said.
“Cost inflation accelerated to the sharpest since February 2017, adding to expectations that inflationary risks will continue over the coming months. Furthermore, amid a stronger oil price forecast and growing fiscal risks, IHS Markit upgraded its CPI forecast to 5.2% for fiscal year 2017-2018.
“That said, although companies were able to raise their average selling prices at the fastest pace in a year, inflation remained modest, highlighting some customer sensitivity to price changes," she added.
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