Manufacturing Sector Activities Moderated Due To The Surging Costs: PMI
By BW CFO World Online Bureau
The manufacturing sector activities were moderated because of the costs incurred during the pandemic, states PMI.
India’s manufacturing sector activities moderated in August, as business orders and production rose at softer rates due to the pandemic and rising input costs. The seasonally adjusted HIS Markit India Manufacturing Purchasing Manager’s Index(PMI) stood at 52.3 in India, down from 55.3 in July, indicating a softer rate of growth that was subdued and below its long-run average.
The PMI data showed an improvement in August in overall operating conditions for the second straight month. In the measure of the PMI, if the numbers stay above 50 then it indicates expansion and below 50 indicates contraction. The growth of the manufacturing sector lost momentum because of the problems faced due to the pandemic. Yet, the consumer needs were matched and the requirements were fulfilled.
A softer upturn in sales led companies to pause their hiring, with business confidence dampened by concerns surrounding the damaging impact of the pandemic. Uncertainty regarding growth prospects, spare capacity and efforts to keep a lid on expenses led to a hiring freeze in August, following the first upturn in employment for 16 months in July.
Indian manufacturers forecasted another monthly rise in cost burdens, thereby taking the current stretch of inflation to 13 months.
Talking to media, Pollyanna De Lima, Economics Associate Director at IHS Markit said, “Charges levied by manufacturers rose as some firms shared part of their additional cost burdens with clients, although to a lesser degree than selling prices. Input prices increased sharply, due to strong competition for scarce raw materials and transportation issues.”
Further Lima added, “the 12-month outlook for production remained positive, though confidence faded amid worries concerning the lasting scars of the pandemic and the adverse impact of rising costs on companies’ finances parallel to a lack of pricing power.”
On the macroeconomic front, the Indian economy grew by a record 20.1 per cent in the April-June quarter, helped by a very weak base of last year and a sharp rebound in the manufacturing and services sectors in spite of a devastating second wave of COVID-19.
Meanwhile, Reserve Bank of India Governor Shaktikanta Das said that the RBI will conduct fine-tuning operations to manage unanticipated and one-off liquidity flows to ensure balanced liquidity conditions in the system.