India Manufacturing PMI high; Pace remains slow

India has released its Purchasing Manager’s Index (PMI) data on Wednesday that showed a proportionately lower growth. The Nikkei PMI for manufacturing has risen to 50.7 as against 50.5 in April, but very low as compared to 52.4 in the month of March. It reported the lowest expansion since 2013 end.

The PMI represents a combination of manufacturing performance and suggests expansion in the economy above 50 and contraction in the economy below 50. December 2015 had shown 49.1 manufacturing PMI. During May, the pace of growth has remained slow with output losing its further growth and poor demand from the overseas markets. Accelerating domestic demand helped PMI to rise.

The Input cost inflation had increased to a 14 month high in the wake of high material costs. However, manufacturers refrained from increasing selling prices despite of high input costs amid higher competition prevailing in the markets. Intermediate goods producers earned better than the consumer or capital goods producers.

With the elevated workforce, the manufacturing activity was mostly revolving around the fulfillment of existing projects and reduction in the outstanding projects. However, new job recruitments  have grown marginally.

The entire situation calls for another rate cut by RBI in the policy to be released on June 7, to boost investment and manufacturing. However, another rate cut seems difficult amid hike in retail inflation due to a faster rate of 5.39 per cent in the wake of enough easing done by RBI since January 2016.

Soon after India, China posted its manufacturing PMI which stands in line with April number at 50.1. This suggested that China is still far from its recovery in near term.