Indian manufacturing sector takes a positive direction

The Indian manufacturing industry has witnessed a rebound in new orders and output as per the data available for August. The expansions were modest, but represented a substantial turnaround from July’s GST-related contraction. The underlying data pointed to a broad-based recovery, with factory orders and production up in each of the three monitored sub-sectors.
 
Companies responded to the improvement in operating conditions by creating jobs and purchasing additional raw materials and semi-finished items. Meanwhile, input cost inflation was reined in as the new tax system meant that some raw materials became cheaper. In fact, the overall increase in input prices was the weakest in a year.
 
Up from July’s 101-month low of 47.9 to 51.2 in August, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) signalled a renewed improvement in the health of the sector.
 
The upturn reflected resumed growth of new orders, production, and employment. Order book volumes increased in August, after having posted the worst performance since early 2009 during July. 
 
After having decreased in July, the output prices rose in August as companies attempted to pass to their clients ongoing increases in cost burdens. The rate of charge inflation was, however, negligible by historical standards. 
 
Indian manufacturers remained cheerful around growth prospects, with marketing efforts, the launch of new products, and favourable economic conditions expected to lead to output growth in the year ahead.