India’s manufacturing sector growth expanded at its slowest pace in nine months in June as inflationary pressure continued to lower demand and output, showed a private survey on Friday.
Although the economic recovery of the Indian manufacturing sector continued in June, aided by robust domestic and international client demand. The growth of total sales and production eased amid intense price pressures.
The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index ( PMI ) stood at 53.9 in June, from 54.6 in May, but above the 50-level separating growth from contraction for a year indicating solid growth in the sector. However, reading in June showed the weakest pace of growth since last September.
” Factory orders and production rose for the twelfth straight month in June, but in both cases the rates of expansion eased to nine-month lows. Increases were commonly attributed to stronger client demand, although some survey participants indicated that growth was restricted by acute inflationary pressures,” the report said.
According to the report, softer increases in production, factory orders, stocks of purchases and employment all dragged down the PMI in June, alongside an improvement in supplier performance which is inverted before entering the calculation.
June data indicated that rates of purchase price and output charge inflation retreated to three-month lows, but remained above their respective long-run averages.
Monitored firms reported increases for a wide range of inputs including chemicals, electronics, energy, metals and textiles which they partly passed on to clients in the form of higher selling prices.
Despite the outlook for the Indian manufacturing industry remaining positive midway through 2022, sentiment slipped: Increases in sales and production stretch to a 27-month low. Inflation is the main concern among goods producers.
“Inflation concerns continued to dampen business confidence , with sentiment slipping to a 27-month low” the report said.
New export orders rose for the third month running in June. The increase was strong by historical standards, despite easing from May’s 11-year high.
The report highlighted that employment rose for the fourth successive month, albeit at a slight pace that was broadly in line with those seen over this period. Job creation restricted backlog growth, which increased at a marginal pace that was the slowest in three months.
Commenting on outcomes Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said “The Indian manufacturing industry ended the first quarter of fiscal year 2022/23 on a solid footing, displaying encouraging resilience on 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,” she added.
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