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Factory activity inches closer to contraction, slips to 25-month low

01 December, 2015

A slow rise in new orders and output pushed India’s factory activity closer to contraction, a survey showed on Tuesday.

The Nikkei Manufacturing Purchasing Managers’ Index (PMI), compiled monthly by financial information services firm Markit, slowed to 50.3 in November as it declined for the fourth straight month and was just points above a reading of 50 which denotes stagnation.

The index, previously known as HSBC Manufacturing PMI, measures the health of the manufacturing sector based on surveys of private sector companies. It had fallen to a 22-month low of 50.7 in October.  

According to the GDP data for the second quarter of 2015-16 released by the Ministry of Statistics and Programme Implementation on Monday, the manufacturing sector expanded at 9.3 per cent—the highest in 12 quarters, buoying growth in the industry. However, figures from PMI and core industries suggest sluggish demand for the third quarter.

Infrastructure index numbers for October, which were also released on Monday alongside GDP data, showed the industry grew at a similar rate as in September at 3.2 per cent but only four of the eight sectors were expanding.

While infrastructure represents 38 per cent of the index of industrial production, a clearer picture may emerge once IIP data for October is released on December 12, 2015, given the dichotomy between index of eight core industries and the IIP data.

While agriculture and services seem resilient, growth is the manufacturing sector is needed for GDP to accelerate in the coming quarters. An absence of growth in manufacturing may leave the GDP falling short of finance ministry’s 7.5 per cent and RBI’s 7.4 per cent estimate. 


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Factory activity inches closer to contraction, slips to 25-month low

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