PMI Numbers Hint At Further Pressure On Manufacturing

HSBC India Manufacturing PMI numbers for July 2013 came in on August 1, showing continued expansion albeit at a very slow pace. The PMI number of 50.1 for July 2013 marked a decline from that of 50.3 in June 2013, indicating a broad stagnation of manufacturing operating conditions in India.

The data compiled by Markit indicates that new orders have fallen in July, which has led to a fall in the output level. Owing to tough economic conditions, demand and supply have taken a beating, causing new job creation to be hammered. The consumer goods sector, however, reported a rise in orders, though at a lower pace.

The report published by HSBC also indicates that the demand for export orders is maintained, although competition has increased. The pace of growth in purchasing activity in the manufacturing sector has also slowed down. The length of deliveries has also increased. Amid the rupee depreciation, companies are reluctant to import overseas raw material. The backlog of work has also shown a month-on-month rise in July.

According to the agency, the expansion in employment levels in the manufacturing sector is also slow. Payroll numbers rose in the consumer goods sector, but have stagnated in the intermediate goods sector and and fell at investment goods firms.

With regard to inflation, it has said that the inflationary pressure have persisted in July, with output prices rising the fastest after February 2013 due to attempts by the producers to pass on prices to consumers.

Leif Eskesen, Chief Economist for India & ASEAN at HSBC, said that the overall manufacturing activity in the country remained flat, with a fall in output and slower growth in exports. Inventory accumulation and employment growth has also slowed down. Inflation has firmed up with rupee depreciation. He added, “The data suggests that the RBI will likely have to keep policy rates on hold for a while given lingering inflation risks and that the recently introduced currency stabilisation measures will not be lifted anytime soon”.