India's manufacturing PMI falls to a minimum of 15 months in August

New Delhi, September 2 () The country's manufacturing sector activity declined to a minimum of 15 months in August, due to a slower increase in sales, production and employment, a monthly survey said on Monday.

The IHS Markit India Manufacturing Purchasing Managers' Index (PMI) fell to 51.4 in August, its lowest mark since May 2018, from 52.5 in July, as most of the survey indicators fell since July to indicate a widespread loss impulse

This is the 25th consecutive month that the manufacturing PMI has remained above the 50-point mark. In the PMI language, an impression above 50 means expansion, while a lower score indicates contraction.

August saw an undesirable combination of economic growth slowdown and higher inflationary cost pressures in the Indian manufacturing industry, said Pollyanna de Lima, principal economist at IHS Markit, adding that most PMI indices moved down, including the key health verification measures for new orders, production and employment.

India's economic growth has plummeted for the fifth consecutive quarter to a minimum of more than six years of 5 percent in the three months that ended in June, as consumer demand and private investment slowed down in the middle of the deterioration of the global environment.

In August, sales expanded at the slowest rate in 15 months, after which production growth and job creation were controlled. In addition, factories reduced the purchase of supplies for the first time since May 2018.

Another worrying sign was the first drop in the purchase of supplies in 15 months, which reflected a mix of intentional reductions in stocks and a shortage of available funding, Lima said.

The survey noted that competitive pressures and challenging market conditions restricted recovery. New orders from abroad also increased at a slower pace in August, with the weakest growth seen since April 2018.

Until manufacturers are willing to loosen bag chains, it is difficult to predict a significant rebound in production growth on the horizon, Lima said.

Sales submitted to national and international customers in turn slowed production growth, which softened to the weakest in a year. Some survey members also reported cash flow problems and lack of available funding.

On the employment front, the survey said that weak sales prevented manufacturing companies from replacing retirees and voluntary dropouts.

In the future, goods producers maintained optimistic growth projections, hoping for a rebound in demand and marketing efforts planned to support production in the coming year. The feeling strengthened to a maximum of 16 months.

On the price front, the measure of input costs accelerated to a maximum of nine months.

Another factor that restricted the purchase quantities was a rebound in the rate of increase in input prices. While not alarming, the acceleration in cost inflation may restrict the central bank's stimulus to the economy in the short term, Lima said.

On Friday, the government also announced its second stimulus in three parts, merging 10 public sector banks into four in order to boost credit to help revive the economy.

A week before this announcement, the first stimulus package that included the reduction of taxes, the improvement of liquidity in the banking sector (formal and shadow), the increase of public spending on automobiles and infrastructure and Accelerated refunds of the Goods and Services Tax (GST))

This was followed by the liberalization of foreign investment rules in four sectors: coal mining, contract manufacturing, single-brand retail and digital media. A third and possibly last package, expected in the coming days, can address the problems facing the real estate sector. DRR ANS ANS