PMI Manufacturing: India's Factory Growth At 9-Month Low In June As Inflation Bites

The Manufacturing Purchasing Managers’ Index, compiled by S&P Global, remained resilient, it fell to a nine-month low of 53.9 in June from May’s 54.6

New orders and output grew at their weakest rate since September last year and companies hired at a slower pace in June.

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The output in factories in India expanded at its slowest pace in nine months in June as elevated price pressures continued to dampen demand and production, citing a private survey, the Reuters reported on Friday. The survey also showed that business confidence was at its lowest in over two years.

The Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, remained resilient, it fell to a nine-month low of 53.9 in June from May’s 54.6, lower than the Reuters poll median prediction of 54.5.

It has been above the 50-level separating growth from contraction for a year, indicating growth in the sector has remained solid.

According to the report, although inflation eased in May to 7.04 per cent after touching an eight-year high of 7.79 per cent in April, a meaningful decline is not seen anytime soon even as the Reserve Bank of India (RBI) is expected to continue with aggressive rate hikes.

Pollyanna De Lima economics associate director at S&P Global Market, said, “The Indian manufacturing industry ended the first quarter of fiscal year 2022/23 on a solid footing, displaying encouraging resilience in the face of acute price pressures, rising interest rates, rupee depreciation and a challenging geopolitical landscape. Yet, there was a broad-based slowdown in growth across a number of measures such as factory orders, production, exports, input buying and employment as clients and businesses restricted spending amid elevated inflation.”

New orders and output grew at their weakest rate since September last year and companies hired at a slower pace in June. However, a sub-index tracking delivery times of goods was above the 50-mark for the first time since February 2021 and at its highest in nearly three years, signalling an easing in supply chain pressures.

That partly helped both input and output prices, which increased at a slower rate last month, but a respite from the cost of living crisis still looks a distant possibility.

Indeed, business optimism declined to its lowest since the onset of the pandemic over two years ago.