New business orders, employment push manufacturing PMI to 53.1 in October

Source: The Business Standard, Nov 02, 2018

New Delhi: Manufacturing activity in October, spurred by domestic demand, were of the level of June, the highest this calendar year, according to the widely tracked Nikkei purchasing managers’ index (PMI).

The PMI rose from 52.2 in September to 53.1 in October. A reading above 50 is expansion and one below it is contraction.

June also saw the PMI at 53.1.

New orders increased sharply in October and companies responding to the PMI survey attributed this rise to advertising efforts and underlying demand. The rise in new order flows has been the fastest since June.

“A combination of domestic and foreign orders fuelled the upturn in overall activity. Although export orders displayed the slowest expansion since July, new work rose at the sharpest pace since mid-year,” said Pollyanna De Lima, principal economist at IHS Markit, which compiles the PMI, and author of the report.

The upturn in exports cooled in October. If these translate into official figures, merchandise exports would again come under pressure after declining in September. The upbeat October PMI will not be captured in the official GDP figures for the second quarter, which would be released by the end of this month.

The GDP figures and PMI do not necessarily move in tandem.

Manufacturers stepped up hiring in October, and job-creation during the month was the strongest since last December.

Notwithstanding the fact that Indian manufacturers were confident that output will be higher next year and they increased their marketing activity and investment, concerns about market conditions dampened the optimism.

“Producers of goods see challenges and uncertainties ahead, which in turn translated into the weakest degree of optimism seen in 20 months,” Lima said.

There was inflationary pressure amid reports of higher prices of chemicals, energy and metals. The average cost burdens increased and some manufacturers passed part of the additional cost on to their clients.

However, the rate of selling price inflation was mild, in the context of the historical survey data, the PMI report said.

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