Some Positives: India’s August Manufacturing PMI Rebounds At 52

India’s Manufacturing Purchasing Managers’ Index (PMI) for August has come in at 52, compared to 46 in July, signalling growth and rebound in production volumes for the first time in five months.

For the first time since March, output expanded in the Indian manufacturing sector in August. Production growth was largely driven by greater client demand for Indian goods following the resumption of business operations, according to firms.

“The upturn was led by an improvement in customer demand as client businesses reopened, after lockdown restrictions eased amid the COVID-19 pandemic,” IHS Markit said. It added that output and new orders expanded at the fastest paces since February – recording a 21-month high.

The decline in foreign exports weighed slightly on overall new orders as firms cited subdued demand conditions from abroad.

“That said, new business received by Indian manufacturers expanded at the fastest pace since February,” it adds.

It, however, notes that – despite easing from July – job shedding continues in August at a strong rate, extending the current sequence of decline to five months. The pace of contraction in workforce numbers softened from that seen in July but remained strong overall.

Higher levels of production supported a modest rise in the quantity of purchases during August, but firms told Markit that limited availability of goods, which onset a further reduction in stocks of purchases, has extended the current rate of depletion to five months.

Supply chains were disrupted for a sixth consecutive month, with firms citing transportation restrictions, supplier delays and capacity pressures as the main drivers of lengthening delivery times.

Reports of higher raw material costs due to supplier shortages and transportation delays stemming from the COVID-19 pandemic, resulted in rising input prices during August.

Cost burdens rose for the first time since March, with the rate of input price inflation at its highest since November 2018. Despite rising cost burdens, Indian manufacturers reported lower factory gate charges due to competitive pressures and efforts to boost sales.

However, the rate of decline eased to only a fractional pace that was the weakest in the current sequence of decrease.

Looking ahead, Indian manufacturers remained optimistic for the next 12 months.

“Positive sentiment was often attributed to hope of the passing of COVID-19 pandemic, improving client demand, and new business wins. Nevertheless, market uncertainty and the onset of a global recession weighed slightly on the degree of confidence which was below the series average in August,” it notes.